USD/CAD spikes to multi-day tops, further beyond mid-1.3200s

   “¢   Resurfacing US-China trade tensions continue to underpin the USD demand.  
   “¢   Renewed weakness in oil prices weigh on Loonie and remains supportive.

The USD/CAD pair quickly reversed an early European session dip to the 1.3235 region and spiked to four day tops in the last hour.

The pair’s sudden dip came in a knee-jerk reaction to some optimistic comments by China’s Foreign Ministry spokesman Geng Shuang, saying that Trump and Xi have agreed to reach mutually beneficial agreements. The downtick, however, turned out to be short-lived and was quickly bought into as the spokesman clarified that the agreement refers to Nov. 1st Trump-Xi phone call.  

The pair rallied around 40-pips in the last hour and was further supported by resurgent US Dollar demand, underpinned by the US President Donald Trump’s latest threat to move ahead with raising tariffs on $200 billion in Chinese imports to 25% from 10% currently.  

Adding to this, some renewed weakness in oil markets, with WTI crude oil losing over 1.0% for the day, exerted some additional downward pressure on the commodity-linked currency – Loonie and remained supportive of the ongoing positive momentum.  

It, however, remains to be seen if bulls are able to maintain their dominant position or the up-move starts fizzling out at higher levels amid growing speculations that the Fed might pause the rate hike cycle as early as spring 2019.

Hence, the Fed Chair Jerome Powell’s scheduled speech on Wednesday and minutes from the latest FOMC meeting on Nov. 7-8 on Thursday will be closely scrutinized for cues about the central bank’s pace of monetary tightening path beyond 2018.  

The Fed’s monetary policy outlook will play an important role in influencing market sentiment surrounding the buck and eventually help determine the pair’s next leg of a directional move.  

Technical levels to watch

A follow-through buying has the potential to continue lifting the pair further towards reclaiming the 1.3300 handle en-route its next major hurdle near the 1.3315-20 supply zone. On the flip side, the 1.3235-30 region now seems to have emerged as an immediate support, which if broken might turn the pair vulnerable to head back towards challenging the 1.3185 important horizontal support.