USD/CAD hits fresh weekly lows under 1.2400 and rebounds

• CAD among top performers ahead of Wednesday Bank of Canada meeting. 
• USD/CAD fell momentarily below 1.2400, hitting lowest in nine days. 

The USD/CAD pair peaked at 1.2450 earlier today but then lost strength and not only erased daily gains but printed a fresh weekly low. Recently dropped to 1.2395 but it quickly bounced back above 1.2400. Lower crude oil prices are not helpline the loonie to extend gains. The WTI was losing $1 at $63.49 a barrel.

As of writing, USD/CAD was trading at 1.2415/18 with mounting expectations for tomorrow’s Bank of Canada meeting. Most analysts expect a 25bp rate hike. The latest round of economic data, particularly about the labor market pushed market odds of a hike to the upside. Volatility is likely to jump with the announcement tomorrow at 15:00 GMT. 

“Despite the NAFTA risks that lie beyond, we do not think it will be enough to derail the Bank to hike 25bps tomorrow. We note however that the NAFTA tape bombs have introduced more two-way risk for CAD around the decision, we think trade concerns lead to more cautious messaging from the Governor, suggesting that a knee-jerk reaction towards CAD strength should be faded,” explained analysts from TD. They doubt that Poloz will look too kindly to roughly 3 hikes priced into the curve by October and they think the market pricing in as much cumulative tightening as the Fed NAFTA risk and the debt overhang will be motivators for a more cautious profile.

USD/CAD Technical levels

To the downside, the area around 1.2400 continues to be a relevant support. Below that region attention would turn to 1.2355 (Jan low) and then to 1.2300. To the upside, the immediate resistance could be seen at 1.2450 (Jan 16) followed by 1.2470 (Jan 15 high) and 1.2510 (Jan 11 low).