USD/CAD explodes above 1.3100, BoC's rate cuts on the table

Currently, USD/CAD is trading at 1.3181, up +1.05% on the day, having posted a daily high at 1.3169 and low at 1.3040.

Trade policy and Donald J. Trump are hot topics today at the Bank of Canada. And, the catalyst to immediate CAD sell-off; rate cuts are on the table 'should downside risk materialize.' Aren't those suffice to break in two, any OPEC and Non-OPEC output 'deal'? The loonie finds no buyers in a moment when the Trump Trade was losing followers. 

As of writing, the pair has gained 150-pips to become the most active currency in today's trading day. On the other hand, as usual, 'O.K.' US data provided further support to dollar bulls to continue their counter-attack on the 1.3100 handle.

To note, historical data indicates that today's gains are the highest performance for the currency pair at 1.05% and its lowest during January is near -1.02% (yesterday's performance).

What's next for the Canadian Dollar in 2017?

James Knightley, Senior Economist at ING, notes on this matter, “In terms of the FX implications we continue to see the formation of three bearish CAD factors in the near term. The first is BoC / Fed policy divergence leading to a further widening of US-Canadian rates. Secondly, the retreat in the post-OPEC oil price spike as US supply glut concerns re-emerge. Thirdly, a NAFTA trade renegotiation risk premium being priced into CAD as Trump take office. These factors could see a 5% move higher in USD/CAD (up to 1.40) in 1Q17.”

BoC's Poloz: A rate cut remains on the table should downside risks materialize

USD/CAD Levels to consider

In terms of technical levels, upside barriers are aligned at 1.3167 (50-SMA), 1.3210 level (previous consolidation zone) and above that at 1.3308 (200-SMA). While supports are aligned at 1.3114, later 1.3050 (NA session's low) and below that at 1.3017 (Jan. low). 

Bank of Canada: rates on hold on Trump’s uncertainty - ING