USD/CAD appears neutral near term – Scotiabank

FX Strategist at Scotiabank Eric Theoret suggested the pair should be supported between 1.2700 and 1.2620 in the near term.

Key Quotes

“CAD appears to be consolidating around the upper end of its two week range, just below levels last seen ahead of the October 25 BoC policy decision. Domestic rate expectations are steady following BoC Gov. Poloz’ inflation speech on Tuesday as the Gov. maintained a cautious bias to tightening. The 2Y spread is rising modestly, testing fresh marginal highs above 20bpts at levels last seen in July. Risk reversals are steady, pricing a relatively elevated premium for protection against CAD weakness. The near-term balance of risk appears to favor CAD consolidation”.

“USDCAD appears range bound between this week’s lows around 1.2700 and the late October highs near 1.2720. Momentum signals are close to neutral and DMI’s have converged. We await a break of the range and highlight the importance of 1.2928 the level representing the midpoint of the May-September range. Support appears limited between 1.2700 and 1.2620”.