USD/CAD rangebound, support around 1.2420 – Scotiabank

FX Strategists at UOB Group believe spot is poised for a consolidative theme in the near term.

Key Quotes

“The outlook for relative central bank policy remains in focus as we note the near complete (CAD-supportive) erosion in the U.S.-Canada 2Y yield spread ending Friday at a fresh two year low around 2bpts Domestic rate expectations continue to firm with OIS pricing 23 bpts of tightening for the October BoC meeting and 33bpts of tightening over the next 12 months. In terms of sentiment, Friday’s CFTC data showed an 8th consecutive weekly improvement in CAD positioning driven by continued short covering and an acceleration in building longs”.

“USDCAD is quiet trading within the lower end of Thursday’s candle. Bearish, oversold momentum indicators are moderating and DMI’s are hinting to exhaustion in the bearish trend. We look to near-term support around 1.2420 and resistance above 1.2520”.