USD/CAD faces resistance near 1.2780 – Scotiabank

Occasional bullish attempts in the pair should meet resistance in the 1.2780 area, according to Eric Theoret, FX Strategist at Scotiabank.

Key Quotes

“Domestic rate expectations are showing signs of stabilization with OIS pricing roughly 11bpts of BoC tightening for January. The 2Y U.S.-Canada spread has struggled to extend much beyond the midpoint of the May-September range and continues to consolidate around 20bpts. Risk reversals remain under pressure, with a broad moderation in the premium for protection against CAD weakness across a range of time horizons. The near-term balance of risk favors modest CAD strength”.

“USDCAD has broken through the 1.2700 area representing the lower bound of its two week range and appears set to test the 21 day MA at 1.2686. Momentum indicators are neutral and DMI’s are converging. Near-term support appears limited between 1.2700 and 1.2620. Resistance is expected at 1.2780”.