USD/CAD neutral/bullish near term – Scotiabank
Eric Theoret, FX Strategist at Scotiabank, noted the pair’s next resistance appears in the 1.2920 region.
“The outlook for relative central bank policy remains dominant, with a continued widening in the U.S.-Canada 2Y yield spread testing fresh multi-month highs at levels last seen in early July. Domestic rate expectations continue to soften, with OIS now pricing in only 10bpts of BoC tightening for January. Near-term domestic risk is limited to the release of second-tier wholesale trade figures (8:30am ET), with nothing major ahead of Thursday’s retail sales. The latest round of NAFTA negotiations concludes today and the near-term balance of risk appears to favor modest CAD weakness”.
“Momentum indicators are modestly bullish and DMI’s are providing confirmation. USDCAD remains well supported with ongoing congestion centered around the 21 day MA (1.2773). USDCAD has made a renewed attempt at breaking the 1.2820 resistance level, and further resistance appears limited ahead of the late October high around 1.2920. We look to near-term support between 1.2780 and 1.2750”.