USD/CAD finds support around 1.3400

The greenback has recovered some ground lost vs. its Canadian peer during overnight trade, now sending USD/CAD back to the 1.3410/15 band.

USD/CAD looks to data

After bottoming out in the 1.3400 neighbourhood in early trade, the pair has managed to regain some attention ahead of the European opening bell in Europe on Wednesday.

In the meantime, spot stays in the area of 2-month tops around 1.3400 the figure, always propped up by rising expectations of a Fed move at its meeting next week. According to agency Reuters, the probability of a 25 bp rate hike on March 15 is at just above 84% based on Fed Funds futures prices.

CAD continues to be driven by policy divergence between the Bank of Canada and the Federal Reserve via US-CA yield spread differentials, especially in the shorter end of the curve. In addition, extra support for the Canadian currency came last week from the speculative community, where net longs have increased to the highest level since early February 2013.

In the data space, US ADP report (190K exp.) will likely get all the attention seconded by the EIA report on US crude oil inventories, while Housing Starts and Building Permits will be in the limelight in Canada.

USD/CAD significant levels

As of writing the pair is up 0.03% at 1.3417 and a breakout of 1.3438 (high Mar.2) would aim for 1.3463 (high Jan.3) and finally 1.3465 (78.6% Fibo of 1.3601-1.2967). On the flip side, the immediate support aligns at 1.3371 (low Mar.3) followed by 1.3359 (23.6% Fibo of 1.3601-1.2967) and finally 1.3320 (low Mar.2).