USD/CAD’s recent slide is evolving into a consolidation - Scotiabank

Scotiabank strategists note that CAD recovery may stabilize and they still rather think USD dips are a buy, ahead of a rebound in the USD in the New Year.

Key Quotes

“Canadian trade numbers were heavily skewed by a large, one off item imported in September so a rebound in the headline trade figure for October should be evident today (the consensus calls for the trade deficit to halve from September’s CAD4.1bn deficit to nearer CAD2.0bn). However, the underlying picture is still troublesome as the volume growth in Canadian exports remains weak, suggesting that overall economic growth momentum may struggle somewhat into the end of the year.”

“The CAD may get a small lift on better headline trade data but the details of the report will be an important guide to GDP prospects into year end. Steadier crude and a small bump in US-Canada short-term rate spreads (greater premium for the USD) suggests the recent CAD recovery may stabilize. We still rather think USD dips are a buy, ahead of a rebound in the USD in the New Year.”

“USDCAD short-term technicals: neutral/bullish Short-term charts suggest USD/CAD’s recent slide is evolving into a consolidation. An inside range day (so far) signals an end to the decline in the USD for now. USDCAD needs to break above short-term trend resistance at 1.3340/45 to gain more upside momentum, however. We see support at 1.3230 (61.8% retracement of the Oct/Nov rally).”