USD/CAD rises further to fresh 2-month highs, eyes 1.2700

• Spot is up more than 200 pips since Friday 
• Key event ahead: Bank of Canada meeting tomorrow 
• Bullish bias supported by rate expectations, US yields and NAFTA

After a short-lived pause USD/CAD resumed the upside, broke above 1.2670 and jumped to 1.2688, reaching fresh 2-month high. 

Eyes on the BoC

The pair is holding near the top, while the greenback gained momentum in the market as US bond yields consolidate at higher levels. The 10-year yield rose above 2.40% for the first time since March. Yield differentials between US and Canadian bonds widened adding support to the upside in USD/CAD. 

The key event ahead will be tomorrow’s Bank of Canada meeting. Market participants expect no change in rates and a dovish message taking into account the latest round of data, that includes lower-than-expected inflation and a weak retail sales report. Overall Canadian fundamentals remain strong but not as much as two months ago. 

Another factor that added support to the upside since late September were NAFTA negotiations. Trump’s comments pointing toward the potential end of the trade agreement affected the loonie, although the most damaged was the Mexican peso. 

USD/CAD significant levels

As of writing, the pair is rising  0.30% at 1.2685, with FXStreet's technical confluence indicator identifying immediate resistance at 1.2690/95 and above at 1.2720 and 1.2777 (Aug high). On the flip side, support might now be seen at 1.2670, 1.2640 (10-SMA in 4 hours chart) and 1.2620 (daily low).