USD/CAD cautiously bullish – Scotiabank

FX Strategists at Scotiabank remain bullish on the pair and highlight the near term support zone in the 1.2920/1.2900 band.

Key Quotes

“The broader tone is dominating as market participants consider the latest geopolitical developments relating to North Korea—specifically the prospect of denuclearization. Domestically, uncertainty remains elevated following the conclusion of the latest round of NAFTA talks as U.S. officials seek to link trade negotiations with the more recent tariff proposals. Bank of Canada rate expectations have continued to soften and OIS are now pricing only 9bpts of tightening for April and just under 25bpts by July. The 2Y U.S.-Canada spread is threatening 50bpts at levels last seen in mid-June, and CAD appears vulnerable heading into Wednesday’s Bank of Canada rate decision (expected hold, statement only) and Thursday’s speech from Dep. Gov. Lane. We are somewhat more constructive at these levels and anticipate an acknowledgement of current uncertainties but no major changes to the policy specific portions of the statement—specifically the ‘cautious’ bias to tightening ‘over time’.

“Daily trend and momentum indicators remain overwhelmingly bullish however USDCAD appears to be attempting a modest reversal from its recent high around 1.3000. We look to near-term support between 1.2920 and 1.2900 and highlight the importance of Monday’s open around 1.2880. Near-term resistance is expected at 1.3020 and 1.3050”.