USD/CAD stays neutral near term – Scotiabank

FX Strategists at Scotiabank remain neutral on the pair, at the same time expecting it to break the 1.2250/1.2380 range.

Key Quotes

“The outlook for relative central bank policy may receive some renewed attention in the aftermath of Wednesday’s Fed, given the modestly hawkish adjustments to the statement tone. A reminder that CAD continues to trade well above levels implied by interest rate differentials, with the 2Y U.S.-Canada spread pushing back above 30bpts and threatening the November 30 high at 35bpts. Risk reversals are pricing a relatively modest premium for protection against CAD weakness, leaving CAD vulnerable to a turn in sentiment”.

“USDCAD has struggled to meaningfully extend its recent decline through 1.2300, and recent price action has clearly identified 1.2280 and 1.2250 as critical support levels. Momentum signals are bearish but their magnitude is muted and they did not confirm Wednesday’s fresh multi-month lows in spot—positive divergence. We await a break of the recent range roughly bound between 1.2250 and 1.2380”.