USD/CAD bearish in the short run – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the pair keeps the neagative view in the short term horizon.

Key Quotes

“Poloz characterized the current level of the policy rate as ‘extraordinarily low’ and spoke of the need to consider the steady absorption of excess capacity heading into the upcoming (July 12) policy decision. Domestic rate expectations have continued to firm with OIS now implying a near-40% chance of a rate hike. Risk lies to the upside. Central bank headline-driven FX movement has been a core feature driving G10 currencies this week, and the theme is set to remain dominant for CAD as we look to Gov. Poloz’ 9:30am ET panel participation (titled ‘Business cycles, growth and macroeconomic policy’) and Deputy Gov. Lynn Patterson’s 2:20pm ET speech (text 2:05pm ET) titled ‘Markets Calling: Intelligence Gathering at the Bank of Canada’. CAD’s vulnerability remains tilted to the upside on the basis of extended, near-record short speculative (CFTC) positioning”.

“USDCAD has cleared 1.3100 testing fresh multi-month lows at levels last seen in late February. Momentum signals are bearish, and the RSI has pushed below 30. There are no major support levels ahead of 1.3000 and the Jan 31 low at 1.2969. The Jan 31 low coincides with the 61.8% retracement of the May 2016-May 2017 rally”.