USD/CAD inter-markets: targets 1.32 on bullish DXY, falling VIX?

USD/CAD pair witnessed sharp-moves over the last 24 hours, having staged a solid V-shaped recovery from 1.30 handle to move back beyond 1.3150 levels. The major is last seen exchanging hands near 1.3160 levels, recording a +0.35% gain on the day.

The major plunged almost 1 big figure in a knee-jerk reaction to BOC’s unchanged monetary policy decision, but quickly reversed lost ground and extended the rebound as markets viewed the BOC decision as outrightly dovish, after Governor Poloz  announced that they "actively discussed" more stimulus. The bank also lowered its growth and inflation forecasts, which also collaborated to the sharp reversal witnessed in the USD/CAD pair.  

However, today’s extension of the upmove is based on three key catalyst, first being renewed broad based US dollar strength, backed by Clinton’s win at the final US presidential election debate.

While the second intrinsic is the extended sell-off in the VIX futures (CBOE volatility index), a risk barometer, which suggests risk-on trades persisting in markets, bolstering the demand for higher-yielding currencies. Further, tumbling oil prices also exacerbated the pain in the resource-linked Loonie, pushing the USD/CAD pair towards 1.32 handle.

Looking ahead, the major will take cues from the upcoming US economic releases, while the ECB decision is likely to hog the spotlight today. Besides, Friday’s Canadian CPI and retail sales data will provide fresh impetus on the CAD, thereby, shaping up next direction in the spot.