USD/CAD bullish-neutral near term – Scotiabank

FX Strategists at Scotiabank noted the pair remains supported in the 1.2500 area for the time being.

Key Quotes

“Short-term Bank of Canada rate expectations have softened slightly in response to Friday’s headline disappointment, however the details were quite supportive (full-time, wages) and OIS are still pricing roughly 64bpts of tightening by December. This week’s domestic risk is limited to Thursday’s speech from BoC Dep. Gov. Schembri and Friday’s manufacturing sales data. The broader tone should dominate through the first half of the week and sentiment appears tentative with risk reversals pricing a relatively elevated premium for protection against CAD weakness”.

“Momentum signals are bullish however their magnitude is muted. DMI’s are confirming, along with the short-term MA’s. We continue to highlight the importance of considerable resistance in the upper 1.25s/lower 1.26s. Specifically, the 100 day MA at 1.2617 and the 38.2% Fibo retracement of the Sep-Dec rally at 1.2592, as well as the midpoint of the range from late December (1.2586). Friday’s daily ‘shooting star’ candle is suggestive of a bearish reversal. Near-term support appears limited ahead of 1.2500”.