USD/CAD broke to higher ground after the BOC cut growth forecasts. Also the rise in oil inventories hurt the loonie.
This may only be the beginning, says the team at BNP Paribas:
Here is their view, courtesy of eFXnews:
BNP Paribas maintains a bearish CAD bias following this week’s Canadian federal elections and the Bank of Canada meeting.
“We believe the downward revisions to the growth forecasts in the Monetary Policy Report speak louder than the BoC’s optimistic rhetoric. Furthermore, the fiscal boost will take time to materialize, suggesting that the risk of further BoC easing is larger than what markets are willing to price in,” BNPP argues.
“Most policy scenarios imply US-Canada rate differentials moving higher into year-end, pushing USDCAD to 1.38,” BNPP projects.
“With this week’s event risk out of the way we think that the upward bias for USDCAD should gradually return in the coming weeks. USDCAD has not traded below 1.2800 since July. Hence, our bias would be to buy USDCAD on dips below 1.30 with technicals suggesting a long position at those levels with a stop placed below 1.2800 offers a good risk-reward,” BNPP advises.
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