USD/CAD momentum still looks supportive – Scotiabank

In opinion of FX Strategists at Scotiabank, the outlook on the pair still appears constructive in the short-term horizon.

Key Quotes

“The CAD is perhaps feeling a little pressure from wide US-Canada spreads, with the 2Y differential at 56bps this morning. But we note that the spot market has not correlated especially well with the shorter-term spread recently and the 5– and 10-year gaps, while elevated, are steady. We still think firm commodity prices provide the CAD with a high degree of protection against sustained weakness at the moment and feel that clear progress on a NAFTA deal could lift the currency. Pressure seems to be rising for an agreement as the US’ attention swings towards trade relations with China. The US may want to avoid fighting trade battles on too many fronts”.

“Trends remain somewhat mixed. The USD pushed higher to test 1.29 earlier but subsequent price action looks soft and suggests an intraday peak may already be in for funds. Support remains quite distant (1.2815/25), however, and underlying momentum still looks supportive for the USD in the short run. Look for more range trading near-term and limited USD downside risk while support in the low 1.28s holds”.