USD/CAD inter-markets: extra gains hinge on Fed

USD/CAD has been advancing since Friday, managing to stage quite a strong rebound from last week’s lows in the 1.3000 neighbourhood to today’s current mid-1.3100s.

CAD keeps ignoring crude oil dynamics as of late. Instead, the pair’s price action has been performing in tandem with US-CA yield spread differentials, bringing once again to the fore the divergence in policy between the Federal Reserve and the Bank of Canada.

Yields in the US money markets are up for the second straight session so far, boosted by supportive tone from Chair J.Yellen and FOMC members along with auspicious results from US docket. Furthermore, Philly Fed Patrick Harker has not ruled out a rate hike at the March meeting at his speech earlier in the Asian session.

In the meantime, spot stays well supported around the critical 1.3000 region ahead of YTD lows near 1.2960. On the upside, the 200-day sma in the mid-1.3100s is offering some resistance at the moment, and it remains the last defense before last week’s tops above 1.3200 the figure, the next short-term target.