USD/CAD door open for a visit to 1.33-1.35 – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, expects the pair could attempt a re-visit of the 1.33/1.35 area.

Key Quotes

“The U.S.-Canada yield spread is widening in a CAD-negative manner and measures of sentiment are providing for added pressure with a rise in implied volatility across a range of time frames. Risk reversals have responded accordingly, pricing a greater premium for protection against CAD weakness. Broader risks are likely to remain dominant throughout the week as we note the lack of domestic data releases ahead of Friday’s monthly GDP for May. We maintain a bearish CAD bias”.

“USDCAD has made a decisive break of its May 24 1.3188 high, clearing 1.32 to reach levels last seen in late March. We maintain a bullish USDCAD bias with expectations of a rise toward 1.33 and 1.35, and note that momentum indicators remain remarkably muted with an RSI of 64 leaving ample space for further upside ahead of the overbought threshold at 70”.