USD/CAD is testing the 1.2850 range for the fourth time since August today.
The three previous tests were beaten back quickly, leading to deep retracements but we're here again. If you keep on knocking, eventually they let you in.
The pair hit an intraday high of 1.2949 in a brief spike on August 19 on delta fears but it hasn't closed above 1.2850 in 2021. If it can stay at these levels for another three hours, it will.
The loonie is falling because of:
- Omicron worries
- Tomorrow's Fed meeting and a probable taper with the potential for a rate-hike signal
- Oil down 1.4% today
- Broader commodities also lower
- Equities in the US and Canada down 0.8-1.2%
It's a classic risk-off trade but a break of old highs suggests it could get worse before it gets better. There's also a tendency in the market for USD/CAD to rally into year end on dollar demand.
I tend to think 1.2950 is more important than the closing level but if that breaks, there isn't anything stopping a test of 1.30 followed by 1.33.
