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CAD Underperforms Amidst USD Weakness Ahead Of CAD CPI

CANADA
  • USDCAD is holding the day’s rise off overnight lows of 1.369, currently at 1.3725 for back within Friday’s range and near unchanged on the day.
  • CAD sees significant underperformance to peers on the day: a combination of a broad-based extension of post-CPI USD weakness and a large widening in negative CAN-US 2Y yield differentials has weighed heavily, offsetting any favourable aspects of the S&P e-mini (+0.8%) and WTI futures (+2%_ rallying strongly.
  • CAD’s unwillingness to rally also comes ahead of an important day tomorrow with CAD CPI (preview here) and the government’s Fall Economic Update before BoC’s Macklem speaks on Wed with a speech tilted “The cost of high inflation”.
  • We see USDCAD support at 1.3676 (50-day EMA) sitting above last Wednesday’s 1.3655, whilst there is limited resistance until 1.3855 (Nov 10 high).
  • RBC recently noted their Positioning Monitor shows “long USD/CAD positioning still quite elevated (when compared to some other USD/G10 pairs)” and “there is an argument to be made that USD/CAD has further space for a selloff amid the current external backdrop”.
  • They see it “important to watch whether the key trendline that currently comes in at 1.3623 holds. Beyond this near-term view on USD/CAD, we are not yet ready to abandon our bias for using selloffs as a buying opportunity.”

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