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In view of FX Strategists at Scotiabank, the pair still aims south despite the recent loss of downside momentum below the 1.2800 handle.

Key Quotes

“The market tone appears set to dominate as there are no major domestic releases scheduled ahead of Friday’s trade and employment data. Domestic oil prices remain weak, despite fresh highs in both Brent and WTI. CAD is trading well above levels implied by our FV estimate (1.3117) using yield spreads and Canada’s terms of trade and we remain somewhat cautious given its impressive near-2.5% rally over the past four sessions. Measures of sentiment appear to be stabilizing and short-term risk reversals are close to neutral, reflecting no premium for protection against CAD weakness. The premium for protection against longer-term CAD weakness remains elevated”.

“Momentum indicators are bearish and directional indicators are confirming however USDCAD appears to have struggled to sustain its recent decline below 1.2800. We continue to highlight the importance of the midpoint of the range from September 2017 at 1.2724 and look to resistance in the mid/upper-1.28s around the 200 day MA (1.2870) and the 38.2% retracement (1.2880) of the September 2017-June 2018 rally”.