Poloz send the Lonnie into the hands of the bears, twice

• USD/CAD: up up and away on Poloz green light to the Loonie bears.
• USD/CAD: higher US yields and dollar and bear sentiment on the CAD.

Commodity FX has been hammered of late despite the CRB settled around near YTD highs. The Loonie has been in freefall, while Canadian wholesale trade sales miss badly ad BoC Poloz signals that there will be no action from the Central Bank at this stage, giving the green light to the bears. Currently, USD/CAD is trading at 1.2848, up 0.69% on the day, having posted a daily high at 1.2861 and low at 1.2749.

The greenback has been on a tear this week, extending last week's resurgent gains on the 90 handle and has had a look in at the 91 handle on Monday in NY trade. Coupled with that and in an environment of higher US yields where the curve is flattening, the Loonie in its own right has been slammed by traders who were given the green light by Poloz to do so today where the implied odds in the OIS market of a BoC May 30 hike have fallen to 35% from nearly 50% last week.

Poloz send the Lonnie into the hands of the bears

Poloz,  firstly speaking to reporters on the weekend, was indicating that higher inflation isn't going to force the hand of the bank.

"What I don't want is for people to be spending this entire year asking me what I'm up to because inflation is above target," Poloz said. "You need once in a while to remind people that there's a range and that's okay, the policy allows for this. We're not violating our target in some way."

Today, Bank of Canada Governor Poloz and Senior Deputy Governor Wilkins were testifying before a House Committee with the following prepared remarks:

• Economy close to potential
• Higher inflation will be due to temporary factors
• Reiterates that higher rates warranted over time
• Reiterates that Bank of Canada will remain cautious on rates
• Bank of Canada to be guided by the incoming data
• Higher rates will be required over time though some degree of accommodation likely still needed to keep inflation on target
• Most important risk to the outlook remains protectionist trade policies
• More economic capacity means economy has more room to grow before inflationary pressures start to build
• In the Testimony, the following key remarks crossed the wires, pressuring the Loonie some more on Monday NY afternoon.
• Gov. Stephen Poloz: 
• Economy is about 50% more sensitive to interest rates
• We believe investment in oil sector will remain flat
• drop in housing from pull-forward effect to reverse
• fundamentals of Canada housing markets remain solid
• Sen. Deputy Gov. Carolyn Wilkins:
• We believe real estate markets are rebounding 
• Signs of speculation is declining housing market 
• BOC needs about 1 year to assess B-20 rule changes

USD/CAD levels

Short-term technicals are bullish-neutral in USDCAD that appears to have found short-term resistance around 1.2850. 

The 50 day MA (1.2783) and the 38.2% retracement of the January-March rally (1.2791) come as key supports while daily momentum indicators are back to neutral. "We look to additional resistance above 1.2850 and note the absence of near-term support ahead of 1.2680," the analysts added.