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The Canadian dollar is on the back foot after the previous gains but stabilized under 1.25. What’s next? The team at TD looks to higher ground.

Here is their view, courtesy of eFXnews:

TD FX Strategy Research suspects that the recent rebound in USD/CAD reflects an adjustment in positioning rather than a change in fundamentals.

“Given the quiet data calendar early this week and repricing of the BoC this fall,  we are not ready to fade the rally in USDCAD just yet,” TD argues.

In the short-run, we think USDCAD is likely to have another go at 1.26 and would prefer to establish fresh short exposure there.  Our positioning indicators suggest that CAD remains a wellpopulated long trade, but also keep in mind that the market has started to cut exposure.

The pair is also rich to HFFV and  a move to 1.2560 would trigger a strong sell signal,” TD adds.

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