USD/CAD neutral near term – Scotiabank

FX Strategist Eric Theoret at Scotiabank stays neutral on the pair in the near term.

Key Quotes

“We note the renewed, albeit mild, CAD negative widening in interest rate differentials with the 2Y U.S.-Canada spread pushing back toward 60bpts. In terms of sentiment, Friday’s CFTC report highlighted a continued decline in gross long and short CAD positions implying uncertainty with regards to the near-term path. Options markets remain quiet with low measures of implied volatility and risk reversals pricing a remarkably low premium for protection against CAD weakness”.

“USDCAD is quiet trading around its 50 day MA (1.3505) at the upper end of its two week range. Momentum signals are close to neutral, DMI’s are muted, and the ADX is trendless under 25. Near-term resistance has been observed in the mid-1.35s at levels roughly corresponding to the 38.2% retracement level of the May 5-25 USDCAD decline. Support is expected around 1.3450”.