• Dovish BoC outlook/falling oil prices continue to weigh on commodity-linked Loonie.
• A modest uptick in the US bond yields underpin USD demand and remain supportive.
• Today’s key focus will be on the latest monthly jobs report from the US and Canada.
After yesterday’s late pull-back from near 18-month tops, the USD/CAD pair regained positive traction and is now looking to move back above the 1.3400 handle.
A modest US Dollar retracement, led by a late recovery in the US equity markets, was seen as one of the key factors prompting some long-unwinding trade at higher levels, especially after the recent upsurge of nearly 300-pips over the past three trading session.
However, a combination of factors continued weighing on the Canadian Dollar and helped limit any immediate sharp corrective slide. The commodity-linked Loonie struggled to find any buyers amid the ongoing slide in crude oil prices.
Sentiment around the Canadian Dollar was further dented by the bearish BoC monetary policy statement on Wednesday and dovish comments by BoC Governor Stephen Poloz, saying that the current level of rates is appropriate for the ‘time being’.
It would now be interesting to see if bulls are able to maintain their dominant position or opt to take some profits off the table as traders start positioning for the keenly watched monthly jobs report from the US (NFP) and Canada, due later during the early North-American session.
Technical levels to watch
On a sustained move beyond the 1.3400 handle, the pair is likely to accelerate the momentum to overnight swing highs, around mid-1.3400s, before eventually darting towards the key 1.3500 psychological mark. On the flip side, immediate support is pegged near the 1.3360-55 region, below which the pair is likely to correct further towards retesting the 1.3300 round figure mark.