USD/CAD inter-markets: next stop 1.3575?

USD/CAD has deflated from recent multi-month tops beyond 1.3400 the figure, although it keeps the bid tone against the backdrop of broad-based USD-recovery and declining crude oil prices.

On the USD-side, the pair remains well underpinned by increasing bets on a Fed’s move by end-2016. Market participants have totally priced in a no-hike at the upcoming FOMC meeting (Wednesday), although the statement could be key in paving the way (even further) for higher rates by year-end. Ahead in the week, US Non-farm Payrolls could add to the already good health of the labour market, giving an extra boost to the buck.

CAD keeps focused on crude oil dynamics as the exclusive driver for the price action, losing further ground in response to the ongoing leg lower in the barrel of West Texas Intermediate after being rejected from fresh 2016 tops around levels just shy of the $52.00 mark. Increasing uncertainty regarding the potential deal between OPEC and non-OPEC countries regarding an output freeze remains poised to drive the mood around crude oil in the near to medium term, although the bullish side of the news seems to have fizzled out.

Positioning remains supportive of further gains in spot, as CAD speculative net shorts remained firm with Open Interest in multi-month highs during the week ended on October 25. Exactly opposed, USD net longs have climbed to levels last seen in mid-August 2015, all according to the latest CFTC report.

That said, with USD/CAD navigating in 7-month tops, there is not much in terms of relevant hurdles until the 50% Fibo retracement of the 2016 drop at 1.3575, ahead of 1.3839, the 61.8% of retracement. Spot looks to keep the constructive stance while above the 2-month support line, today near 1.3060.