USD/CAD to test 1.20 before 1.30 - Westpac

Call for USD/CAD at 1.20 before 1.30 on a six month horizon under some threat but very stiff technical resistance at 1.2920 should slow the move (USD/CAD strength into this level was repeatedly stymied late last year), suggests Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“CAD remains inexplicably the weakest G10 vs the USD year to date. NAFTA renegotiation repeatedly cited as a risk but that doesn’t gel with MXN holding its own among the top 3 performing majors vs the USD YTD.”

“The underlying growth picture remains solid. Weaker data of late can be ignored – soft Dec retail sales reflects payback for Iphone/Black Friday induced Nov strength, while the outsized 88k decline in employment follows a record setting 17 consecutive months of gains.”

“Firming wage/inflation pressures and a solid US picture should see BoC at least match expectations in 2018 for two hikes, supporting CAD.”