USD/CAD bullish near term, resistance seen at 1.3132 – Scotiabank

FX Strategist at Scotiabank are now bullish on the pair and expects the next upside hurdle to emerge in the 1.3130 region.

Key Quotes

“The outlook for relative central bank policy is turning increasingly bearish for CAD as market participants adjust their expectations for the Bank of Canada in an environment of escalating trade uncertainty following President Trump’s latest comments. CAD OIS are fading and the 2Y U.S.-Canada spread has extended to fresh highs nearing 53bpts. Friday’s domestic calendar includes manufacturing sales for January and expectations are relatively low with consensus looking to a 0.9% m/m decline. CAD remains vulnerable to further near-term weakness and the options market is pricing a greater premium for protection against CAD weakness”.

“USDCAD has extended its rally to fresh highs with a decisive break through 1.3000. Momentum is bullish, DMI’s are confirming, and trend strength is firm with an ADX at 40. Near-term resistance appears limited ahead of the mid/lower 1.31s, specifically the 61.8% retracement of the May-Sept 2017 decline at 1.3132. We note the absence of near-term support between 1.3050 and 1.3000”.