USD/CAD is keeping steadier today after yesterday’s shove higher but buyers are still looking buoyed
The Fed certainly surprised with a hawkish tilt yesterday, not in terms of language but the dot plots and economic projections did say a lot.
That has the potential to shake up the dollar narrative going into the summer and for USD/CAD, that presents a rather interesting twist of fate after the downside run so far.
Among the major currencies, I would argue that the GBP and CAD remain most stretched against the dollar and with sentiment in the greenback perhaps starting to turn, they are the currencies which may be most vulnerable to a sharper pullback.
I still favour the loonie against other havens i.e. franc and yen, but against the dollar, the conviction has certainly gotten a lot lesser now after yesterday’s events.
For USD/CAD, the break back above 1.2200 now sets the stage for buyers to work their way towards the key trendline support near 1.2360 but I reckon there is still the potential for a move towards the 100-day moving average (red line) @ 1.2427.
Those will be key levels to watch in gauging the retracement here, which may be a more persistent one with the dollar finally finding some conviction to move.