USD/CAD inter-markets: buy the dip?

USD/CAD is struggling to regain upside traction during the second half of the week after the recent drop to lows in the mid-1.3000s. The recent deal between OPEC and non-OPEC members on an output freeze has boosted the barrel of West Texas Intermediate to levels above the $47.00 mark, despite the subsequent correction lower.

The dovish stance from the BoC via recent comments by Governor S.Poloz keeps limiting the upside in CAD, motivating at the same time spot to attempt another visit to peaks in the mid-1.3200s.

The divergence in monetary policy between the BoC and the Federal Reserve remains in the back burner as a driver for further weakness in the pair, although US-CA yield spread differentials remain USD-supportive.

Fed Fund futures prices have retreated from daily highs, and are now pointing to a probability of a Fed’s rate hike in December at just above 42% and slightly over 10% for the month of November following earlier comments by Philly Fed P.Harker that December would be an appropriate time for hiking rates.

Regarding positioning, CAD speculative net longs have receded a tad during the week ended on September 20, while Open Interest have climbed to the highest level since mid-June.

In the meantime, USD/CAD has found support in the area of the 55-day sma at 1.3050, and there are no relevant hurdles until the key 200-day sma at 1.3231 and Tuesday’s top near 1.3280. On the downside, the initial support aligns around the psychological handle at 1.3000, where sit recent lows and the 100-day sma, ahead of the base of the 4-month rising channel in the 1.2880 area.