USD/CAD keeps the neutral/bullish stance – Scotiabank

FX Strategists at Scotiabank remain bullish on the pair as long as it trades above the 1.3100 handle.

Key Quotes

“Domestic rate expectations remain largely unchanged following Friday’s disappointing employment data, with OIS still pricing about 20bpts of tightening for the Bank of Canada’s October meeting. Yield spreads are also consolidating and Friday’s CFTC data revealed no material changes to speculators’ net short position. Measures of implied CAD volatility are rising and lifting the premium for protection against CAD weakness. USDCAD is currently well above our FV estimate of 1.3053”.

“USDCAD has drifted back to the upper end of its one week range roughly bound between the lower 1.31s and lower 1.32s. We remain bullish above the 1.31 level roughly corresponding to the upper bound of the (broken) descending trend channel from late June. A sustained break of 1.3220 would likely deliver a full retracement and gains back toward the upper 1.33s”.