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USD/CAD: Bias for further CAD weakness - Scotia Bank

FXStreet (Bali) - According to Scotia Bank FX Strategists, since we are in the midst of a strong USD rally, the bias is for further CAD weakness.

Key Quotes

"CAD is weak, trading to fresh 5‐year lows in the European session on a broad USD rally and ongoing weakness in oil markets. Yesterday’s trade data was firmer than expected, shifting the balance into a surplus and providing evidence of a firming non‐energy export sector (see chart). This is an important mitigating factor to the extensive CAD negative developments the markets have had to digest. The combination of strong U.S. growth and a weak CAD are positive for the Canadian economic backdrop and CAD. However, with oil prices at multi year lows, a dovish Governor Poloz, uneven domestic economic outlook and a broad USD well entrenched, the outlook for CAD has darkened."

"Accordingly, yesterday’s positive trade release serves only to slow CAD weakness and not reverse it. Ultimately there are developments that will slow the weakness in CAD; but as we are in the midst of a strong USD rally, the bias is for further CAD weakness."

"USDCAD short‐term technicals: bullish—studies have shifted rapidly into bull territory with strong upside momentum. Resistance from here comes in at the psychologically important whole numbers like 1.1500 as oppose to historical levels from years past; Support lies at 1.1400. The strong upward USD trend is strong and it is too early to pick a top in USDCAD and accordingly we are biased to trade with it for near‐term traders."

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