USD/CAD resistance lies between 1.2520/1.2600 – Scotiabank

FX Strategist at Scotiabank Eric Theoret sees the pair’s upside meeting resistance in the 1.2520/1.2600 range in the near term.

Key Quotes

“USDCAD has broken above the 1.2520 resistance level around the midpoint of its October range roughly bound between the lower 1.24 area and 1.2600”.

“Trend and momentum signals are moderately bullish and short-term MA’s are bullishly aligned. Near-term support is expected around the 50 day MA (1.2454). Resistance is limited between 1.2520 and 1.2600”.

“We are bearish CAD heading into the release of the Bank of Canada’s Business Outlook Survey (10:30am ET). The bar to disappointment is low as policymakers assess the outlook for export growth in the context of recent weakness in trade data. Investment intentions, capacity pressures, and inflation expectations will also be heavily scrutinized. Bullish CAD positioning is extended and risk reversals are muted. Friday’s CFTC data showed a fresh multi-year high in the CAD net long and risk reversals continue to price a relatively small premium for protection against CAD weakness. Domestic rate expectations continue to soften, and OIS are now pricing in a 50% chance of a 25bpt hike for December (down materially from 80% in early September). The 2Y U.S.- Canada spread appears set to break out of its October range and narrow back to flat. CAD is vulnerable”.