USD/CAD stays neutral/bearish near term – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the outlook on the pair remains neutral/bearish in the short-term.

Key Quotes

“Yield spreads appear set to narrow in a CAD-supportive manner, and oil prices may find near-term support as a result of the broad USD decline. Options markets are suggestive of a continued erosion in the premium for protection against CAD weakness, and the one week risk reversal is even pricing a slight premium for protection against CAD strength. We note that large (USDCAD) option expiries at 1.36 may deliver congestion through the early part of the NA session”.

“USDCAD has cleared its short-term MA’s (9 day at 1.3665, 21 day at 1.3632), however the 1.36 level appears to have held on a closing basis. We note the broad, bearish turn in momentum signals and convergence of DMI’s hinting to a shift in the balance of risk. A sustained break of 1.36 should shift the focus to mid-lower 1.35s, specifically the March 9 intraday high 1.3535 and the April 27 intraday low 1.3530. Note the 50 day MA at 1.3479. We look to near-term resistance at 1.3650”.