USD/CAD neutral-bullish near-term – Scotiabank

FX Strategist at Scotiabank Eric Theoret noted the neutral-bullish stance for the pair in the short-term, while he expects it to re-visit the 1.33-1.35 band in the longer run.

Key Quotes

“CAD is trading in tandem with oil prices and remains disconnected from yield spreads. Measures of sentiment are shifting in a CADsupportive manner as risk reversals continue to fade the late June rise in the premium for protection against downside risk. Note that Friday’s CFTC data detailed a third consecutive week of short covering in gross (CAD) shorts, covering a period in which CAD was remarkably stable (USDCAD around 1.30). CAD’s inability to strengthen in response to supportive turns in sentiment leaves it vulnerable, and we maintain a bias to medium-term CAD weakness”.

“Momentum signals are neutral, the ADX is trendless and well under 25, and USDCAD is trading in a tight range around its 21 (1.2947), 50 (1.2945) and 100 day (1.2970) MA’s (see top chart). The broader technical picture is bullish as we consider the rising trend channel from early June and the ascending trend line off the May-June lows. We look to near-term support around 1.2850 and maintain a bias to medium-term gains toward 1.33 and 1.35