USD/CAD consolidated after overnight BOC-led slump to 14-month lows

The USD/CAD pair was seen consolidating overnight slump to 14-month lows and seesawed between tepid gains/minor losses above the 1.2700 handle. 

As was widely expected, the Bank of Canada on Wednesday raised its policy rate for the first time in 7-years by 25bps to 0.75%. In the post-meeting press conference, the BOC Governor Stephen Poloz showed optimism over the positive momentum in the labor market and domestic economy, bolstering prospects for another rate hike by December and resulted in sharp appreciation for the Canadian Dollar.

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The pair, however, managed to rebound around 70-pips from lower levels and the subsequent price action suggests that the recovery was solely led by short-covering, and chart driven amid near-term oversold conditions. 

The pair now seems to have entered a consolidation phase amid mildly softer tone surrounding crude oil prices, which has failed to benefit the commodity-linked currency - Loonie. Meanwhile, persistent US Dollar selling bias, following the Fed Chair Janet Yellen's dovish testimony was seen lending some support and has eventually led to a range bound/subdued price action through early European session on Thursday.

Later during the NA session, US economic data - weekly jobless claims, PPI print, along with the release of Canadian NHPI would be looked upon for some trading impetus ahead of Fedspeaks.

Technical levels to watch

Immediate support is now pegged near 1.2725-20 region, below which the pair could weaken back below the 1.2700 handle and head towards retesting yesterday’s swing lows support near 1.2680 level.

On the flip side, sustained recovery move beyond session tops resistance near the 1.2765 region might trigger a short-covering rally towards the 1.2800 handle en-route the next major hurdle near 1.2850-60 region.