Long USD/CAD for target of 1.32 – Deutsche Bank

In view of analysis team at Deutsche Bank, risk-reward favours buying USD/CAD ahead of the Bank of Canada meeting with the following parameters.

“Target 1.32, entry 1.2910, stop 1.2810”

Key Quotes

“A first hike this week is almost fully priced (95%), but the risk is that the Bank communicates this as a reversal of the last 'insurance' rate cut, rather than as the beginning of a hiking cycle. The rates market's discounting of a second hike in December could thus prove premature. Technically, Canada data surprises have had the longest stretch in positive territory on record, and on our technical dashboard USD/CAD is now the most stretched currency pair in G10. Although both CFTC and Corax show residual net shorts in CAD, it has been aggressively bought over the past month in anticipation of a hawkish BoC. As a result, USD/CAD now looks cheap against WTI.”