USD/CAD extends BOC-led sell-off, weakest since April-mid

The Canadian dollar extends the overnight rally against its American rival into Asia, now pushing USD/CAD to print fresh two-month lows of 1.3274.

USD/CAD: A major policy shift on the cards?

The USD/CAD pair remains heavily dumped, as the bears extend the overnight sell-off, which was triggered by aggressive CAD buying, after BOC senor deputy governor Wilkins dropped a surprise bomb during her speech late-Monday.

Wilkins’ comments suggested a clear shift in the bank’s interest rates outlook, signaling a hawkish tilt, after she noted, ‘Will assess if all the stimulus in place is still needed as economy growth continues and, ideally, broadens further”.

The spot is down almost 2 big figures and looks to test next support at 1.3250, as Asian traders react to the big switch overnight. However, it remains to be seen to what extent the renewed downside plays out, as risks remain to the upside, with speculators long on the pair, which suggests a big squeeze could be on the cards.

The Loonie extends its winning streak into a third day today, finding support from upbeat Canadian jobs data and firmer oil prices. Meanwhile, the US dollar remains side-lined in a narrow range against its main competitors, as investors gear up for the much-awaited FOMC outcome due later this week.

Next of note for the major remains the US PPI data due later in the NA session, while the US API crude inventories report will be also eyed for fresh impetus on the commodity-currency.

USD/CAD Technical levels                

The next resistance can be seen at 1.3300 (zero figure), 1.3730/71 (200-DMA/ daily pivot) and 1.3400/08 (5-DMA). Next support to the downside can be found at 1.3250 (psychological levels), 1.3216 (daily classic S2/ Fib S3) and 1.3180 (key support).