USD/CAD outlook remains bullish near term – Scotiabank

FX Strategists at Scotiabank expect the pair to face some congestion in the 1.2920-1.3020 band.

Key Quotes

“Trade concerns are ongoing and Italy’s election result is weighing on the broader market tone. The latest round of NAFTA negotiations is set to conclude on Tuesday and headline risk is elevated as President Trump ties possible tariff exemptions to a ‘new and fair NAFTA agreement’. This week’s domestic calendar includes Wednesday’s Bank of Canada decision (statement only, hold expected), Thursday’s ‘Economic Progress Report’ speech from Dep. Gov. Lane, and Friday’s jobs data. CAD appears vulnerable and broader developments remain dominant as fundamentals offer added pressure with spreads widening to fresh highs at levels last seen in June. Risk reversals are also pushing higher, pricing a sizeable premium for protection against CAD weakness. The near-term balance of risk favors an extension of CAD’s recent decline”.

“Trend and momentum indicators are unequivocally bullish with an ADX of 30 and an RSI of 72. USDCAD is extending its rally to fresh multi-month highs at levels last seen in mid-July, through the midpoint of the range from May. We look to near-term congestion in the 1.2920-1.3020 area highlight the potential importance of the 100 week MA at 1.2980. Near-term support appears limited ahead of 1.2820”.