USD/CAD support emerges around 1.2850/20 – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, stays neutral on the pair and noted that support should appear in the 1.2850/20 band in the near term.

Key Quotes

“Domestic rate expectations are steady with OIS pricing roughly 8bpts of BoC tightening for January. Spreads remain extended and the 2Y U.S.-Canada yield spread is hovering above 32bpts around levels last seen in late June. OPEC headline risk is set to remain elevated throughout the first half of Thursday’s NA session, however the vulnerability is somewhat mitigated by CAD’s tighter correlation to a broader set of CAD-relevant commodities relative to oil (WTI)”.

“USDCAD has climbed to the upper end of its one month range roughly bound between the mid-1.26 area and the lower 1.29s. Momentum signals are modestly bullish but trend strength is muted. Near-term resistance is limited ahead of 1.2920. We look to support between 1.2850 and 1.2820”.