USD/CAD short-term perspective still bullish - Scotiabank

Eric Theoret, Strategist at Scotiabank notes that the short-term perspective remains bullish for USD/CAD, while the CAD seems somewhat disconnected to its typical drivers (oil, yield spreads).

Key Quotes

“The broader tone remains dominant in the absence of domestic data releases and CAD remains somewhat disconnected to its typical drivers (oil, yield spreads). Measures of implied CAD volatility are showing signs of stabilization across a range of time horizons, hinting to the potential for a turn following their recent, dramatic, post-Brexit decline.”

“Sentiment has played a key role in limiting the extent of CAD’s fundamentally-driven decline from early May. Its scope to provide further CAD support appears to be moderating.”

“USD/CAD short-term technicals: bullish—USD/CAD is respecting the rising trend line from early May as well as the ascending trend channel from early June. Wednesday’s drop in USD/CAD was short-lived, underscoring the importance of support around 1.30. Any break should see further support at 1.2980.”

“Near-term resistance is expected at 1.3080 followed by 1.3120. Note that trend signals are muted (ADX sub-25 at 12) and momentum signals are neutral (48).”