USD/CAD extends is extension from the 1.20 area, set to go higher?

• USD/CAD rallied in an extension of the October recovery
• Central Bank divergences killing the Loonie

USD/CAD hit fresh highs overnight on the back of the ECB meeting, extending the BoC's fuelled decline in the loonie while markets get the green light to continue chasing the Trump trade. Currently, USD/CAD is trading at 1.2850, up 0.03% on the day, having posted a daily high at 1.2855 and low at 1.2845.

• ECB: Dovish taper - BBH

Will the greenback continue to attract demand?

USD/CAD rallied from 1.2450 on the 20th Oct and completed the move overnight from a cent high to close at 1.2849 in the NY session. The BoC has recognised that the Canadian economy has come off the boil and it has decided to adopt a ‘wait and see’ approach to monetary policy. "Expectations for additional tightening before year-end to follow up the Jul and Sep moves have been left in the lurch and the CAD looks set to extend its correction from the 1.20 area in the coming weeks," explained analysts at Scotiabank.

Also, the price of oil is unable to find traction onto the $53 handle thus far, potentially living up for a double top should the greenback continue to find demand from investors backing it on political, economic fundamentals and technically. 

USD/CAD levels

Analysts at Scotiabank explained that they see support at 1.2780/85, stronger at 1.2720 and resistance (minor) at 1.2860. Key resistance now is 1.2930 (50% Fib retracement of the 1.38/1.20 drop).  The FXStreet Technical Confluences Indicator is also useful in identifying those areas of support and resistance.