CAD in Focus – Yellen’s Testimony and BOC Rate Decision

Today USD/CAD is one of the most vulnerable pairs. There are two risks – Janet Yellen’s testimony in Congress and the Bank of Canada rate decision.

I have already written about it – CAD has a big potential to rise. On the whole, the undervalued nature of the Canadian currency plays the biggest role here, and the possible overvalued nature of USD only adds some oil to the flames.

If you look at Canadian economy, you will notice a significant improvement in labor market, trade and retail sales on the back of modest inflation. The GDP growth during the recent 3 quarters averaged around 3.5 per cent. And in such positive environment CAD has shown the appreciation only during the last two months. It only stepped on its bullish path, and it has a long way to rise, given the hawkish tone of the Central Bank.

Meanwhile, investors have already priced in the aggressive tone of the Fed, optimistic sentiment from Janet Yellen, and another rate hike before the end of the year. If any of these factors fells out of the equation, it may put USD under pressure. And today’s testimony will be analyzed in detail by the market. Less hawkish tone of Yellen may send the dollar tumbling,

The next target for USD/CAD is 1.2850 followed by 1,2760.