USD/CAD short term stance neutral-bullish – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the pair’s stance remains on the neutral/bullish side in the near term.

Key Quotes

“Relative central bank policy remains dominant, pulling CAD to the lower end of its multi-month range despite fresh near-$50/bbl highs in oil prices (WTI, see middle chart). The 2Y U.S.-Canada yield spread is now comfortably trading around 25bpts at levels last seen in early June, as markets respond to a renewed sense of confidence from cautiously hawkish Fed and adjust their expectations for the BoC in light of its dovish ‘tilt’.

“The recent rise in oil (WTI up 11% from the September 28 open) has likely served to offset the pressure from relative policy and interest rate differentials. Any weakness in oil from here would remove one of CAD’s key support pillars and likely deliver fresh lows beyond the levels seen in late September”.

“Momentum signals are only modestly bullish however the broader ascending trend channel is holding with a sequence of higher lows and higher highs from May”.

“USDCAD appears set to resolve its recent consolidation between 50 day MA (1.3054) support and 200 day MA (1.3214) resistance with a sustained break above the latter. We look to gains through 1.3250 and the late September highs around 1.3280 toward the 1.33-1.35 area”.