USD/CAD reclaims 1.3500 handle ahead of Canadian GDP

After spending majority of the day within a 20-pips narrow trading range, the USD/CAD pair finally broke on the upside to move back above 1.3500 psychological mark.

Maintaining its high degree of correlation with oil, weakness around crude oil prices, with WTI crude oil trading with a cut of over 1%, is denting demand for the commodity-linked currency - Loonie. Moreover, Thursday's disappointing Canadian CPI might have renewed speculations that the BoC might ease its monetary policy further, if not, provides the headroom for delaying any rate-hikes, and is further weighing on the Canadian dollar.

Looking at the broader perspective, the pair's post-FOMC sharp recovery from the vicinity of the very important 200-day SMA has gained additional legs above 50-day SMA. Hence, even a mild disappointment from today's Canadian monthly GDP print for October might trigger a fresh bout of short-covering and continue boosting the pair further during NY trading session.  The Canadian GDP is is expected to remain flat on a monthly basis versus 0.3% growth recorded in the previous month. 

Trader will also take cues from the release of new home sales and revised UoM consumer sentiment index from the US, scheduled later during the day. 

Technical levels to watch

Yesterday's high near 1.3520 level is likely to act as immediate resistance above which the momentum seems to lift the pair towards 1.3537 (Nov. 28 high) en-route 1.3565 (Nov. 18 high). On the downside, 1.3485 now becomes immediate support, which if broken is likely to accelerate the slide towards 1.3440-35 horizontal zone ahead of 1.3415-10 strong support.