USD/CAD points to further gains near term – Scotiabank

Eric Theoret, FX Strategist at Scotiabank believes spot could advance towards the 1.3480 area in the short term horizon.

Key Quotes

“We remain bearish on the basis of relative central bank policy and note the potential for further CAD weakness following the release of Tuesday’s disappointing trade figures given their implications for Q1 growth and the Bank of Canada’s tone into next week’s MPR forecast update. We continue to highlight the risk of an extension to the anticipated closing of the output gap, last estimated in the January MPR for mid-2018. Markets are currently pricing roughly 6bpts of BoC tightening over the next 12 months, with downside risk for CAD in the event of a moderation in tightening expectations”.

“Momentum signals have shifted, DMI’s have confirmed, and short-term MA’s appear poised to provide added confidence in the turn with the imminent crossing of the 9 day MA above the 21 day MA. Near-term support is expected in the 1.3380-1.3400 area and resistance has been observed at 1.3450. We look to gains through 1.3480”.