FX Strategists at Scotiabank see the pair supported in the lower 1.2900s amidst the current near term neutral outlook.
“The recovery in domestic oil prices appears to have stalled and Western Canada Select has struggled to extend much beyond $25/bbl. Domestic rate expectations are also holding steady with OIS fully pricing one 25bpt hike for next week and another by March. Wider interest rate differentials are pressuring CAD and measures of sentiment are mixed. Short-term risk reversals are showing signs of a turn following their recent moderation. Longer-term measures have been remarkably stable pricing a sizeable premium for protection against CAD weakness”.
“Momentum signals are neutral and trend strength indicators are at 18 month lows. The 1.2920 support level appears to have held and USDCAD has returned to the mid-1.29s. We would anticipate additional near-term support in the lower 1.29s around the upper bound of the recent (trade deal) gap. Near-term resistance is expected between 1.3000 and 1.3020”.