USD/CAD outlook points to the neutral side – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the now neutral tone on the pair in the short run.

Key Quotes

“CAD appears somewhat disconnected from its typical drivers, ignoring both oil prices and yield spreads—the latter stabilizing around 20bpts after doubling last Friday. Such a dynamic heightens the importance of sentiment as we note the remarkably low levels of implied volatility and the steady, continued decline in the premium for protection against CAD weakness”.

“A third consecutive session of USDCAD weakness has pushed its momentum indicators back to neutral. USDCAD has broken below both its 9 and 21 day MA’s (1.3092 and 1.3079, respectively) however it has yet to test the 50 day MA at 1.2980”.

“We look to near-term support at 1.2980 and potential near-term resistance at 1.3120. Note that USDCAD is still trading within the ascending trend channel from early June, one that suggests support at 1.2920 and resistance at 1.3350”.