USD/CAD: Loonie has some catching up to do from a fundamental perspective – CitiBank

Analysts at Citibank point out the Canadian dollar has benefitted from the general reflationary dynamics/risk on momentum across markets. They expect risk sentiment to continue to be an important driver and forecast USD/CAD at 1.30 over the 0-3 month period. 

Key Quotes:

“The loonie has benefited from the general reflationary dynamics/risk on momentum we’ve seen across markets. We expect risk sentiment to continue to be an important driver, but also think CAD has some catching up to do from a fundamental perspective such as oil prices. WTI have found a bottom and continue to steadily rise. This may continue to support CAD over our forecast horizon as our forecast WTI at 51$/bbl in 12m.”

“We do note that risks to CAD remain elevated in line with hazards to general risk assets (second wave risks, health disappointment, US election, US/China relations)-”

“USDCAD is rallying as daily momentum turns up from very oversold levels. The down move slightly overshot the 200d MA. A squeeze back towards 1.3734 now looks possible, with support at 1.3357.”