USD/CAD inter-markets: scope for a test of 1.3250

USD/CAD has quickly left behind the key barrier at 1.3100 the figure today, boosted by a renewed buying bias around the greenback and declining crude oil prices, with the barrel of West Texas Intermediate dropping to test the $45.00 neighbourhood.

While expectations of a potential move by the Fed later this month continue to drive the sentiment around USD, crude oil dynamics remain the exclusive driver for CAD, offsetting the US-CA yield spread differential – which continues to favour the buck mainly in the shorter end of the curve.

Fed Funds futures prices have retreated from daily highs, now assigning a 15% probability of a rate hike in September and over 45% in December, all according to CME Group’s FedWatch tool.

USD/CAD faces initial upside target in the 1.3250/70 band – home of July’s tops and the 200-day sma - ahead of 1.3311 (38.2% Fibo of the 2016 drop). On the other hand, the immediate support aligns around 1.3015/10 (base of the 4-month rising channel and the 55-day sma) ahead of the 1.2970/60 band, where sits the 20- and 100-day sma.