USD/CAD sinks to nine-day low after upbeat comments from Poloz

Technical Analysis

Author: Adam Button | usdcad

USD/CAD down a full cent

The odds of a March Bank of Canada rate hike have risen more than 10 points to above 60% on the back of comments from BOC Governor Poloz.

"The economy has made tremendous progress over the past year, and it is close to reaching its full potential. We are very encouraged by this, and we are growing increasingly confident that the economy will need less monetary stimulus over time," he said.

That line has driven the drop in the pair (and broad rise for the Canadian dollar).

What's left aside is that most of the speech is about worries on the economy and that he continued to say the BOC will be data depending and cautious in raising rates.

So a March hike is certainly on the table but it depends on the next two months of economic data.

Moreover, the Canadian oil market continues to struggle with a massive glut and bottleneck and is now trading at a $28 discount to WTI. Risks from NAFTA, housing and consumers are also high.

So what's next?

I struggle to see the pair breaking below the recent range and falling to 1.2600 unless the wheels fall of the US dollar because of a tax reform disaster.

The trade is probably to go with a break of that range.