USD/CAD: The risk of further gains towards the 1.38 area is hard to exclude – Scotiabank

The CAD’s slump over the past few days is its worst three-day run since last November. Economists at USD/CAD analyze USD/CAD outlook.

Bullish momentum reinvigorated

Canadian data prints this week need to reflect some resiliency in Canadian growth to help steady the exchange rate; markets are pricing in marginally more risk of another BoC rate hike before year-end (14 bps) relative to the Fed and have 18 bps of tightening factored in by January. If those odds weaken, the CAD may ease further still – despite already looking cheap. 

With little or no obvious technical sign that the USD rise is peaking on the short-term chart, the risk of further USD gains towards the 1.38 area is hard to exclude; the snap higher in the USD has reinvigorated bullish momentum on the shorter-term studies which will have the effect of limited short-term USD corrections – likely to the mid/upper 1.36 area.