USD/CAD closes back in on the 100-day moving average
The pair is up 0.3% on the day to 1.2370 with the high touching 1.2382, closing in on the 100-day moving average (red line) @ 1.2393.
Let's keep things short and simple with this one.
The loonie will stay underpinned from oil prices and given that the BOC was spearheading the central bank tightening charge, it was primed for a strong run and that spelled downside danger for USD/CAD - which we saw in the opening five months.
The rejection near 1.2000 was supposed to be a technical one but the bounce extended post-FOMC as the Fed added some new complications to the equation.
The question now is whether or not the BOC will outpace the Fed in tightening policy.
I still think that there is still some degree of uncertainty with regards to that as the Fed made it so much easier for every other major central bank to 'outdove' it and there's little reason not to, unless one is worried about inflation running too hot that is.
At this stage, I would say that we may come to retest 1.2000 again later in the year but that conviction is much lower than it was pre-FOMC. Instead, I'd rather bet on the loonie long-term against the yen and franc on rate differentials.
As for USD/CAD, the 100-day moving average presents a key technical test and a retest of the June highs and breaking above that, then the dynamic of the pair will change.
Otherwise, there's still a slight bias in favouring the loonie when leaning on these technical levels but the dollar side of the equation is looking more admirable by the day - depending on how quickly the Fed wants to shape its taper talk of course.