USD/CAD could reach 1.38 near term – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, believes the pair could attempt a test of the 1.3800 handle and beyond in the near term.

Key Quotes

“The 2Y U.S.-Canada spread ended Tuesday just above 58bpts and appears set to push beyond the ~60bpt high from January 2016 to reach levels last seen in 2007. Oil prices, which had provided a crucial offset to the drag from spreads, appear vulnerable below the 200 day MA support level”.

“We remain bullish USDCAD (bearish CAD) targeting 1.40 for Q2 with expectations of a slight moderation to 1.38 for Q3 and 1.36 for Q4”.

“Momentum signals are bullish and confirming the fresh highs in spot. The RSI is well above the overbought threshold at 70 and pushing toward 77—still shy of the recent peaks in the mid-80 area (middle chart). DMI’s are bullishly aligned and ADX trend strength is firming. We look to gains through 1.38 toward the 61.8% Fibo retracement level at 1.3839 and highlight the risk of a push to 1.40”.