USD/CAD faces resistance above 1.2820 – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the pair should meet a strong hurdle in the 1.2820 region.

Key Quotes

“Domestic rate expectations have stabilized over the past week, and the 2Y U.S.-Canada yield spread has steadied just below 20bpts. CAD’s correlation to oil prices (WTI) appears to be firming from remarkably low levels, as WTI tests fresh multi-year highs above $55/bbl. Risk reversals are also shifting in a CAD-supportive manner, with a broad moderation in the premium for protection against CAD weakness. The near-term balance of risk appears to favor modest CAD strength”.

“USDCAD appears soft. Bullish momentum is waning and DMI’s are converging. The 9 day MA (1.2818) has been broken, and near-term support appears limited ahead of the 21 day MA (1.2656). The recent double top implies a near-term push to the lower 1.27 area and resistance is expected above 1.2820. A reminder that USDCAD’s September-October rally faltered just below the midpoint (1.2928) of the May-September decline”.