USD/CAD tumbles to six week lows under 1.2600

• Canadian dollar outperforms on hawkish BoC.
• US dollar is under pressure across the board, DXY drops 0.60%.
• USD/CAD heads for the fourth weekly decline in a row.

After taking a pause following the rate hike from the Bank of Canada on Wednesday, the USD/CAD resumed the downside on Thursday and broke below 1.2600, to the lowest level in six weeks.

The pair bottomed at 1.2581 and it is hovering around 1.2590, holding onto important weekly losses. The loonie is headed toward the fourth weekly gain in a row and has turned positive for the current year.

The decline is being driven by a weaker US dollar on Thursday. The DXY is falling by 0.60%. Equity markets are mixed while US yields are flat. Economic data from the US came in mixed, with a lower-than-expected reading of the ADP employment report ahead of tomorrow’s NFP.

The loonie was also helped by hawkish commentaries from Bank of Canada (BoC) Deputy Governor Paul Beaudry. On Thursday he said that the BoC sees an increasing likelihood that it may need to raise its policy interest rate to 3% or higher. 

The USD/CAD looks oversold but no signs of a correction or consolidation are seen at the moment. The next support level might be located at 1.2570 followed by the 1.2535 area. On the upside, resistance levels lie at 1.2630 and 1.2670. The dollar needs to rise and hold above 1.2685 to alleviate the negative pressure.

Technical levels