USD/CAD: Loonie set to strengthen in the coming months – Scotiabank

USD/CAD trends are relatively flat on the session, with the pair trading narrowly around the 1.26 point. Positive underlying fundamentals, tighter Bank of Canada policy and positive seasonal trends suggest growing downside risk for USD/CAD, economists at Scotiabank report.

Clear move under 1.2565/75 to open up further downside

“We do think that firm domestic growth trends, rising interest rates, and firm commodity prices point towards the CAD remaining firm – and strengthening a bit more obviously – in the coming months when seasonal trends tend to be more positive for the CAD.” 

“We note that Friday’s close for the USD was the lowest weekly close for spot since late Jan, suggesting that the recent, sideways range trade around the 1.2750 point may be showing signs of breaking down (bearishly for the USD).”

“A clear move under 1.2565/75 would signal more immediate downside risk for the USD.” 

“USD rallies remain a sell.”