CANADA
- USDCAD has again met resistance at what’s now a joint high of 1.3775 first seen yesterday, with Canadian sensitivity to lower commodity prices limited by linkages to the US.
- This level marks initial resistance after which sits 1.3792 (Jun 11 high) before the bull trigger at 1.3846 (Apr 16 high) as the prior bear threat continues to diminish.
- Momentum indicators aren’t quite flashing red yet, with the 14-day RSI at 64.6 so not yet technically overbought. However, CAD net shorts were at historical extremes last week (47% of open interest) in positioning that we feel could limit near-term sensitivity to any dovish surprises in tomorrow’s BoC decision and leaves risks if the Bank is less dovish than some expect – see the preview here.
- The US dollar has seen strong upward pressure throughout today, and helps strengthen the Canadian dollar a touch on crosses after what has been a sizeable trend depreciation with the trade-weighted exchange rates still close to ytd lows.
- EURCAD for instance sits at 1.4938 although it’s only a relatively modest pullback after the climb over the past month to yesterday’s new recent high of 1.4996. It pierced downtrend resistance ahead of last week’s ECB decision and opened key targets of 1.5045 and 1.5113 for the cross.
EURCAD (white) and USDCAD (yellow)Source: Bloomberg
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