USD/CAD neutral to bullish short term – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the pair’s neutral to bullish outlook in the near term.

Key Quotes

“OIS are pricing just over 2bpts of BoC tightening over the next 12 months and the 2Y U.S.-Canada yield spread remains elevated above 40bpts around the mid-point of its range from late November. Measures of sentiment are bullish, with Friday’s CFTC data showing a sixth consecutive weekly build in gross CAD longs with a push to levels last seen in April 2014 (middle chart). The net long is at highs not seen since June 2016. Measures of implied CAD volatility are low, and risk reversals suggest a continued moderation in the premium for protection against CAD strength”.

“USDCAD is quiet trading around the mid-point of its range from late January, consolidating below its 200 day MA near 1.3150. Momentum indicators are neutral, DMI’s are muted, the ADX is trendless, and short-term MA’s have flattened out. We note the sequence of higher lows from January 31, suggesting near-term support in the mid-1.30 area. Resistance is limited ahead of 1.32”.