Analysts at TD Securities explained that now with less trade uncertainty, the CAD could recalibrate to other drivers for the time being, like the nascent improvement in risk appetite.
Key Quotes:
“The break below the 200- dma in USD/CAD may help keep the pair heavy, though the extent of this may be limited.”
“We would be a bit surprised to see a move below key support near 1.2700/30 (the 50% fibo retrace from the 2017 lows) given that CAD longs has been well established on the crosses (less so vs. the USD however).”
“Tightening in the curve is also more than sufficient at this point, and we do not expect the current deal will do much to shape policy in the near-term.”
“Longer-term, it remains to be seen whether the deal will be ratified in a new Congress. All told we see the pair prone to a 1.28/1.32 range, giving rise to short volatility structures (via 6M strangles) to position for dissipation in trade uncertainty.”
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