USD/CAD: traders remain cautiously bearish below upper 1.27's

Currently, USD/CAD is trading at 1.2737, down -0.11% on the day, having posted a daily high at 1.2773 and low at 1.2721.

USD/CAD has recovered from the fresh one-year intraday post-BoC lows. However, relative central bank policy remains dominant in an environment of softening Fed expectations as market participants consider the outlook for the Bank of Canada following Wednesday’s 25bpt hike, explained analysts at Scotiabank. 

Fed's Kaplan: Future removal of accommodation should be done patiently, gradually

While the markets expected action from the BoC yesterday, the Central Bank surprised markets with a much more hawkish rhetoric than anticipated and that boosted the CAD further. However, as the analysts at Scotiabank explained further:

"The Bank of Canada remains data dependent and intends to assess the impact of policy tightening in the context of elevated household indebtedness. There are no high level domestic releases scheduled ahead of next Friday’s CPI and retail sales. A reminder of CAD’s vulnerabilities with net short CFTC positioning as options market participants unwind positions protecting against short-term CAD weakness."

USD/CAD levels

Scotiabank's outlook for USD/CAD, in the short-term technicals, is cautiously bearish: "Momentum indicators are bearish but also oversold and suggestive of near-term caution following Wednesday’s impressive USD/CAD decline. Wednesday’s move cleared the last remaining Fibo retracement level (76.4% at 1.2775) of the May ‘16-’17 rally, leaving no major support ahead of the May 2016 low at 1.2461. In terms of near-term resistance, we look to the upper 1.27 area followed by 1.2820."