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  • The Greenback sees a quick bounceback from the CAD as the BoC’s Poloz weighs in on trade and interest rates.
  • NAFTA talks are continuing to be a tense affair with little follow-through.

The USD/CAD is seeing some fresh market tensions as NAFTA headlines continue to cross the wires, restraining the pair near 1.3035, and a speech from the Bank of Canada’s Poloz is suggesting that the BoC is set for another rate hike in October regardless of tensions resulting from wobbly trade talks with the US.

According to analysts from TD Securities,  “With the output gap closed and the overnight rate at least 1.00% below its neutral rate, the path for the BoC is still clearly towards higher rates – the fact that the Governor’s laundry list of economic uncertainties had a dovish tilt to it just implies that they will maintain their gradual approach. If the uncertainty surrounding the economy were to disappear we would expect to see rates rise at a faster pace. Recent economic activity more than justifies a rate hike in October, and we would need to see a material deterioration in the outlook to prevent a follow up hike in the first half of 2019.”

The USD/CAD peaked at 1.3080 in Thursday’s action, with the Greenback pushing higher after US GDP and consumption figures came in as expected or better, but a healthy mix of positive and negative readings across the US’ fairly large data dump for Thursday kept the USD from extending too far on either side, and NAFTA headlines are seeing the USD/CAD second-guess direction heading into Friday, ducking back to a low of 1.3016 as the Dollar-Loonie pairing remains close to the 1.30 major technical level.

USD/CAD levels to watch

As noted by FXStreet’s own Yohay Elam in his Canadian GDP preview: “1.3100 was a support line in September and resistance in August. 1.3175 capped the pair in early August. 1.32220 was a swing high in early September.  Below the round number of 1.3000, we find 1.2970 that supported the pair in mid-September and during August. 1.2880 is a double-bottom after serving as support in both late September and late August. 1.2820 dates back to May.”