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USD/CAD: bulls going for the 1.28 handle

  • USD/CAD testing 1.28 handle.
  • WTI trading soft and testing below 56 handle.

USD/CAD is comfortably better bid at the start of the week, rising from the 50 hourly SMA and in the recovery of end of week losses. Currently, USD/CAD is trading at 1.2795, up 0.25% on the day, having posted a daily high at 1.2811 and low at 1.2754. 

WTI has been sent off a cliff at the start of the week, dropping below the 56 handle and testing 55.80 support at the time of writing. Elsewhere, near-term domestic risk is going to be limited ahead of Thursday’s retail sales, with NAFTA-related headline risk set to continue into Tuesday. 

What do we have this week for the pair?

"Domestic rate expectations have softened modestly following Friday’s CPI figures, with OIS now pricing in 11bpts of tightening for January. The 2Y U.S.-Canada yield spread has extended to a fresh multi-month high above 25bpts, reaching levels last seen in early July (top chart). Friday’s CFTC data showed a continued paring of risk for both gross long and gross short positions (middle chart). The net position remains long," explained analysts at Scotiabank. 

FOMC Minutes to take centre stage this week - BBH

USD/CAD levels

As noted by analysts at Scotiabank, momentum signals are close to neutral and trend strength is weak. "USDCAD has extended the upside from just above the midpoint of its range from late October. Near-term resistance has been observed at 1.2820. Support is expected between 1.2720 and 1.2700."

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