USDCAD cracked above 1.2700  in early New York trading, reaching 1.2720 before retreating to  1.2695 ahead of US data releases.   September Durable Goods rose 2.2% compared to  August’s 2.0% gain, ex-transportation was unchanged at 0.7%.

Durable Goods is a volatile data series, and September’s weather may have skewed these numbers, which helps to explain why the “knee-jerk” US dollar rally ended abruptly.

It is a big day for USDCAD traders.  The Bank of Canada policy meeting statement and the quarterly Monetary Policy Report are released at 10:00 am, followed by Governor Poloz’s press conference at 11:15 am.

USDCAD has moved steadily higher, rising from 1.2062 on September 7 to 1.2696 overnight. Long CAD/Short US dollar positions have been unwound with the break of key technicals levels.  Broad US dollar strength supported USDCAD gains, but a lot of the move is because of elevated expectations for a dovish BoC statement.

Mr Poloz has said that rate “hikes are “data dependent.” (which is a pretty obvious statement)  The strength of domestic data has moderated, but that moderation has occurred after far stronger than expected economic growth.

The nearly 5.5%  rally in USDCAD may have already offset the effect of a 0.25% rate hike, leaving scope for another increase.  (no one expects a rate increase today)

Oil prices have remained firm and well-above $50.00/barrel. Prices were struggling near the $49.00/b area in September when Mr Poloz tossed cold water on an October rate increase.

USDCAD is at major resistance in the 1.2720-80 area (Currently trading at 1.2720) stemming from previous tops and bottoms as well as Fibonacci retracement.

Firm oil prices, the proximity of major resistance and the risk that the BoC may not be as dovish as expected suggest selling USDCAD at current levels with a stop loss at 1.2790

FX markets were lively overnight.  Weaker than expected Australia CPI drove AUDUSD lower.  NZDUSD continued to slide because of the new Labour government.

In Europe, GBPUSD rallied from 1.3120 to 1.3254 after better than expected Q3 GDP data (Actual 0.4% vs forecast 0.3%, q/q).  That rally led to GBPJPY demand which boosted USDJPY in the process

EURUSD was steady to firm after a better than expected ZEW survey in Germany.  A bump in ZEW Survey expectations for Switzerland lifted USDCHF.

USDCAD Technical outlook:

The intraday USDCAD technicals are bullish while prices are above 1.2660, looking for a break of resistance in the 1.2740 area to extend gains to 1.2780.  A break above 1.2780 would target 1.3130 (61.8% Fibonacci retracement of May September range) although resistance at 1.3000 will be sticky.  A break below 1.2650 will lead down to 1.2560.  For today, USDCAD support is at 1.2640 and 1.2590.  Resistance is at 1.2710, 1.2740 and 1.2780.

Today’s Range 1.2620-1.2720

Chart: USDCAD daily