USD/CAD eyes 1.2700, as rally stays unabated

The greenback keeps its upside momentum unchanged vs. its Canadian neighbour, now sending USD/CAD to the area of daily highs in the 1.2680 region.

USD/CAD challenges 4-week tops

Spot is advancing for the sixth session in a row so far today and trading at shouting distance from 4-week peaks just above 1.2700 the figure

In fact, CAD keeps shedding part of the recent strong rally that dragged the pair to the 1.2410 area in late July, levels last traded in late May 2015, all on the back of increasing weakness surrounding the buck and the more aggressive message from the Bank of Canada.

In addition, yield spread differentials between US and CA money markets, particularly in the shorter end of the curve, have turned USD-positive in past sessions, alleviating some upside pressure on CAD and at the same time collaborating with the pair’s upside.

From the positioning side, CAD speculative net longs climbed to the highest level since January 29 2013, as shown by the latest CFTC report during the week ended on August 1.

Nothing scheduled today in the Canadian docket, as markets stay close to the Civic Holiday. In the US, the Fed’s labor market conditions index and speeches by FOMC’s dovish governors J.Bullard (St. Louis Fed, 2019 voter) and N.Kashkari (Minneapolis Fed, voter) are expected.

USD/CAD significant levels

As of writing the pair is gaining 0.27% at 1.2683 facing the next hurdle at 1.2738 (23.6% Fibo of the 2017 drop) seconded by 1.2940 (38.2% Fibo of the 2017 drop) and finally 1.3000 (psychological handle). On the flip side, a breach of 1.2616 (21-day sma) would aim for 1.2545 (10-day sma) and then 1.2412 (2017 low Jul.27).