USD/CAD: top of range, but headed to 1.35?

USD/CAD broke through the 1.3180 resistance and is now consolidating on the 1.32 handle awaiting key drivers in the FOMC and Friday’s GDP reading for May.

We are at the top of the pairs range here for last several months while the U.S.-Canada yield spread is widening in a CAD-negative manner , as noted by analysts  at Scotiabank who explained that measures of sentiment are providing for added pressure with a rise in implied volatility across a range of time frames. "Risk reversals have responded accordingly, pricing a greater premium for protection against CAD weakness."

USD/CAD levels

"Short-term technicals are bullish according to the analysts, "USD/CAD has made a decisive break of its May 24 1.3188 high, clearing 1.32 to reach levels last seen in late March" adding, "We maintain a bullish USD/CAD bias with expectations of a rise toward 1.33 and 1.35, and note that momentum indicators remain remarkably muted with an RSI of 64 leaving ample space for further upside ahead of the overbought threshold at 70."