USD/CAD hits fresh two-month high and retreats, Yellen holds the key

The USD/CAD pair prolonged its strong bullish trajectory further beyond the 1.3400 handle and surged to two-month high level near the 1.3420-15 region. The pair, however, quickly retreated from highs and is currently hovering around the 1.3400 handle. 

Spot continued gaining traction on Friday for the fifth consecutive session, despite of modest US Dollar retracement and a minor recovery in crude oil prices. The pair's latest leg of up-move could be attributed to the US treasury bond yields' solid performance amid increasing prospects for an eventual Fed rate-hike move at its upcoming policy meeting on March 14-15. 

Meanwhile, possibilities of a follow through short-covering on a sustained move above the 1.3400 handle could have also collaborated to the pair's strong up-move to the highest level since Jan. 4. Nevertheless, the pair is now all set to post strong weekly gains and the highest weekly closing for 2017.

Today's US economic docket features the release of ISM non-manufacturing PMI but is likely to be overshadowed by Fedspeaks, including a speech from the Fed Chair Janet Yellen, which would be looked upon for confirmation for a March Fed rate-hike and eventually the pair's next leg of directional move.

Technical levels to watch

Below the 1.3400 handle, immediate support is pegged near 1.3380-75 area, which if broken is likely to accelerate the slide towards 1.3355-50 region ahead of 1.3320-15 horizontal support.

On the upside, any further up-move is likely to confront immediate resistance near 1.3435-40 region, above which the pair seems all set to surpass 1.3455-60 resistance and aim towards reclaiming the 1.3500 psychological mark.