USD/CAD outlooks stays bullish short term – Scotiabank

FX Strategist at Scotiabank Eric Theoret said the pair could re-visit the area above 1.3200 the figure, recent tops, in the near term.

Key Quotes

“CAD is soft, a relative performer in an environment of broad-based USD strength with market participants’ focus squarely centered on expectations for Fed tightening following Harker’s comments and ahead of Wednesday’s release of the Feb 1 meeting minutes”.

“CAD tested a fresh two week low in early European trading, completely ignoring the impressive gains in oil, suggesting a shift in focus toward the outlook for relative central bank policy. The 2Y U.S.-Canada yield spread is pushing toward the upper end of its 36-48bpt range from late November, leaving CAD vulnerable to further downside”.

“USDCAD has tested a fresh two week high, breaching its 200 day MA (1.3148) for the first time since early February. USDCAD’s current upswing follows last week’s completion of a bullish hammer candle, with a clear turn above the Jan 31 low. The sequence of higher lows is encouraging, and suggestive of a shift in the balance of risks. We look to near-term gains toward the early February high above 1.32. Support is expected at 1.3080”.