USD/CAD erases Thursday's decline. What's next

Technical Analysis

Author: Adam Button | usdcad

The market is left confused by Poloz

USD/CAD plunged to 1.2710 from 1.2860 yesterday on comments from BOC Governor Poloz but 24 hours later, it's completely recovered.

Part of the story is US dollar strength, and part was a soft Canadian manufacturing report earlier today but much of it is a lack of faith in signals from Poloz.

"Looking at the short-term chart, the level to watch is yesterday's bounce-back high of 1.2815. Look for a rebound to 1.2850 if it breaks," I wrote earlier today.

So what now?

Having had some time to digest his comments, they were hawkish. He essentially said the guidance on 'caution' is meaningless so they could hike at any point. So it's tough to get too bearish on the loonie.

That said, there are plenty of reasons to worry, including NAFTA and oil prices.

Ultimately, I think the trade is to go where the market leads, and that will depend on which way this range breaks.