USD/CAD neutral/bearish near term – Scotiabank

In view of FX Strategists at UOB Group, the pair’s outlook remains neutral to bearish in the near term horizon.

Key Quotes

“Monday’s late session NAFTA headlines drove an impressive bullish turn in CAD as market participants considered media comments attributed to unnamed officials hinting to U.S. hopes for a preliminary deal ahead of next week’s Summit of the Americas. Domestic rate expectations have stabilized and OIS are pricing a 50% chance of a 25bpt hike for May and just under a full hike by July. The 2Y U.S.-Canada yield spread has narrowed modestly and short-term risk reversals are hinting to a renewed erosion in the premium for protection against CAD weakness. We are bullish CAD, looking to medium-term strength into the spring/summer period”.

“Momentum signals are neutral. We await a break of the one week range roughly bound between the mid/upper 1.28s and mid/lower 1.29s. We look to near-term resistance above 1.2920 and look to an extension through 1.2850 toward the 1.2820-1.2800 area. The medium-term trend is bearish following the mid-March rejection of critical resistance in the lower 1.31 area. Support appears limited between 1.2800 and 1.2720”.