USD/CAD neutral/bullish, could reach 1.3250 – Scotiabank

USD/CAD could accelerate its upside towards the mid-1.3200s, according to FX Strategist at Scotiabank Eric Theoret.

Key Quotes

“CAD is down over 1.0% from this week’s high seen just ahead of Wednesday’s Bank of Canada policy decision and statement release in which policymakers communicated a downward ‘tilt’ in the outlook for inflation”.

The marginally dovish adjustment in tone was compounded by BoC Deputy Governor Lane’s Thursday presentation in which he called attention to a rise in excess capacity. We look to further downside for CAD as markets adjust to this renewed widening in policy divergence between a tentatively dovish BoC and an increasingly hawkish BoC”.

“USDCAD is up for a third consecutive session, climbing back above its 100 day MA (1.2948) as it attempts a clear break of 1.2950 the level representing the 38.2% Fibo retracement of the May-July rally. A sustained break would follow the bullish signal delivered by the mid-August rejection of the 61.8% Fibo (1.2764) and pave the way for further gains toward the July high around 1.3250”.