USD/CAD bullish near term – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the short term outlook on the pair has shifted to bullish.

Key Quotes

“Domestic rate expectations have softened since last Friday and yield spreads have widened with the 2Y U.S.-Canada spread pushing toward 10bpts”.

“Speculative (CFTC) CAD longs are somewhat extended at the upper end of their multi-year range and risk reversals are suggestive of a rise in the premium for protection against short-term CAD weakness”.

“USDCAD has cleared last week’s high with a push into the lower 1.26 area and appears set to test the 21 day MA at 1.2642. Bearish momentum signals are shifting to neutral and DMI’s are converging. We look to further near-term gains toward the July 12 intraday low at 1.2681 followed by the July 12 close at 1.2750. Support is expected at 1.2550”.