TechnoMeter

The Bank of Canada seemed to provide fuel for USD/CAD bulls with the statement that core inflation measures “continue to point to material excess capacity in the economy.” The statement combined with USD strength to stretch the 2-year differentials to their widest in 3-months. Betting against a pair that is showing the steepest yield differential in a quarter is a bet against momentum, which can be painful when wrong.

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Sticking to the tenet of not fighting strength, nor buying weakness, we’ll look for the topside to continue in USD/CAD even if USD shows some exhaustion after the strong run higher at the start of the week. Many traders are keeping an eye on the 1.3350/80 zone as a price level to watch. A close above this zone could mean that we’re soon to move to the top half of the channel toward 1.36/38. The additional Fundamental risk for the pair is Canadian GDP on Thursday followed by key Fed speaker’s Yellen & VP Fischer on Friday.

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