USD/CAD holds comfortably above 1.29 handle, BOC and Yellen in focus

The USD/CAD pair traded with a positive bias for the third consecutive session and extended its slow recovery from 10-month lows, further beyond the 1.2900 handle.

The pair has been moving back and forth around the 1.2900 handle since the beginning of this week as traders seemed reluctant to initiate any fresh aggressive bets ahead of the much awaited BoC monetary policy decision. However, with a 25 basis point rate hike fully priced by the markets, unwinding of some bearish positions drove the pair higher for the third consecutive session. 

   •  BoC: Ready or not, a rate hike is coming – BMO CM

Traders seemed to have largely ignored the ongoing rally in crude oil prices, which tends to drive demand for the commodity-linked currency - Loonie, and mildly softer tone around the US Dollar Index, with repositioning trade acting as an exclusive driver of the pair's up-move to session tops near the 1.2935 region. 

Apart from the key BoC announcement, investors will also be focusing on the Fed Chair Janet Yellen's testimony, later during NY session, for clues over the timing of next Fed rate hike action and eventually determine the pair's next leg of directional move.

   •  Yellen statements likely to remain consistent with FOMC message - BNPP

Technical levels to watch

A strong follow through buying interest might trigger a short-covering rally back towards the key 1.30 psychological mark, above which the pair is likely to extend the recovery move further towards 1.3060-65 resistance. On the flip side, weakness back below the 1.2900 handle now seems to find support near 1.2870 area, which if broken is likely to accelerate the slide towards 1.2830-25 horizontal support en-route the 1.2800 round figure mark.