USD/CAD keeps falling, breaks below 1.3300

The upside bias around the Canadian Dollar remains well and sound on Tuesday and is now dragging USD/CAD to test sub-1.3300 levels for the first time since mid-April.

USD/CAD lower on BoC

CAD advanced to fresh 2-month tops vs. its American neighbour on Tuesday, extending its gains following the hawkish tone from Deputy Governor C.Wilkins’ speech on Monday.

Wilkins gave an upbeat assessment on the domestic economy yesterday, stressing that the recovery remains sustainable and broad-based, both across regions and industries. Wilkins also downplayed recent softer-than-expected inflation figures, while emphasizing the moderate growth on wages and well-anchored inflations expectations.

All in all, the BoC now seems to have shifted to a more hawkish view, with July’s Monetary Policy Report now gaining further relevance and with market chatter already mulling the idea of a potential rate hike as soon as Q3 2017 (instead of Q1 2018).

Yields in the Canadian money markets, particularly the 2-year reference, have quickly leapt to 3-month highs around 0.85%, collaborating further with CAD’s appreciation.

USD/CAD significant levels

As of writing the pair is losing 0.25% at 1.3292 and a breach of 1.3260 (low Apr.17) would open the door to 1.3220 (low Apr.13) and finally 1.3007 (low Fe.16). On the upside, the next hurdle is located at 1.3334 (200-day sma) followed by 1.3379 (100-day sma) and then 1.3440 (61.8% Fibo of the April-May up move)