USD/CAD bearish near term, support lies around 1.2720/50 – Scotiabank

FX Strategists at Scotiabank believe the pair’s stance remains bearish, while resistance is expected to emerge in the 1.2720/50 zone.

Key Quotes

“The broader market tone remains critical as market participants consider the apparent easing in global trade tensions. Renewed risk appetite is driving gains across a broad range of commodity prices, improving Canada’s terms of trade. The outlook for relative central bank policy is offering additional, albeit marginal, support. Bank of Canada rate expectations were largely unchanged in response to Monday’s Business Outlook Survey, and the 2Y U.S.-Canada spread remains elevated just below 50bpts. Risk reversals are suggestive of a continued erosion in the premium for protection against CAD weakness and we remain bullish CAD into the spring/summer period”.

“Momentum signals are bearish and DMI’s are confirming. The RSI is at 38, leaving ample room for additional USDCAD weakness ahead of the oversold threshold at 30. USDCAD has retraced half of its January-March rally and appears set to extend toward the 61.8% retracement at 1.2585. Near-term resistance is expected between 1.2720 and 1.2750”.