USD/CAD stays neutral near term – Scotiabank

FX Strategists at Scotiabank keep the neutral stance on the pair in the short-term horizon and see resistance in the 1.3070 area.

Key Quotes

“Domestically, rate expectations are firming following Wednesday’s BoC statement that removed ‘gradual’ and revealed policymakers’ desire to return to a ‘neutral stance’ (estimated to be between 2.5% and 3.5%—above the current target for the overnight rate at 1.75%). OIS are now pricing another full 25bpt hike by January and yield spreads are narrowing. Domestic oil prices remain incredibly weak however, and the deterioration in Canada’s terms of trade has been acknowledged by the BoC. USDCAD is currently trading above our FV estimate at 1.2950”.

“Recent resistance in the lower 1.31s appears to have held and USDCAD is now well within its descending channel from June. Bullish momentum indicators have faded to neutral and trend strength indicators are muted. Recent support has been observed below 1.2980 and USDCAD is now back above its 50 day MA (1.3011). We look to near-term resistance around the 100 day MA (1.3071)”.