USD/CAD: near-term gains toward 1.3100 seen - Scotiabank

Eric Theoret, FX Strategist at Scotiabank said they maintain a bearish medium-term bias to Canadian dollar and look to near-term gains of USD/CAD toward 1.3100 with a focus on the July 11 high 1.3140 and the late May high 1.3188.

Key Quotes

“CAD is weak, trading toward the lower end of its one week range, pressured by the broader tone of risk aversion. Near-term domestic risk is limited ahead of Friday’s retail sales and CPI, leaving the focus squarely centered on sentiment and broader developments.”

“Note that the IMF releases its WEO forecast update at 9am ET, with expectations of downward revisions to the outlook for global growth. CAD remains largely disconnected to the 2Y U.S.-Canada yield spread and appears to be trading in tandem with oil prices. Measures of sentiment appear to be stabilizing, as risk reversals steady following their recent fade of the late-June jump in the premium for protection against downside risk.”

“Shifts in sentiment observed in both options and futures markets have delivered CAD support through the period since the UK referendum, providing an important offset to pressure resulting from deteriorating fundamentals. We maintain a bearish medium-term bias to CAD.”

“USD/CAD short-term technicals: neutral-bullish—USDCAD has climbed to a fresh four session high following a break above its 100 day MA (1.2966) and we look to near-term gains toward 1.3100 with a focus on the July 11 high 1.3140 and the late May high 1.3188. Near-term support is expected at 1.2950.”