USD/CAD: Risk Premium Too Low, Seasonals Bullish; Time To Buy USD/CAD – BofA


What is the outlook for USD/CAD in the near-term?

Here is their view, courtesy of eFXdata:

Bank of America Global Research discusses its recent long USD/CAD exposure via 3-month call spread 1.34/1.38 call spread (spot ref: 1.3160, vol refs: 7.9% offer vs. 8.6% bid) for 0.54% USD, with max return 5.5:1.

“With the September BoC meeting behind us, we favor positioning long for a tradable rally into September. More broadly, we see this occurring in the context of potentially higher market volatility, softer oil and a rising USD…CAD has recovered from March weakness on the back of surging global risk appetite and higher oil, which softened Canada’s terms-of-trade shock,” BofA notes.

USD/CAD calendar seasonals are bullish. Over the last 10 years, USD/CAD has been higher 9 out of 10 times over the next 60 trading days. This is also consistent with broader bullish USD seasonals,” BofA adds.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.