USD/CAD faces near term support at 1.2750 – Scotiabank

FXZ Strategists at Scotiabank remain neutral on spot near term and noted the support area in the mid-1.2700s.

Key Quotes

"Domestic rate expectations have firmed considerably in the aftermath of Tuesday’s GDP surprise and BoC Gov. Poloz’ speech on household debt, with OIS pricing nearly one full 25bpt hike by July and another by October. Yield spreads have narrowed in a CAD supportive manner and the outlook for relative central bank policy appears set to offer support heading into the next couple of BoC meetings. Risk reversals are suggestive of a slight moderation in the premium for protection against CAD weakness and may compound the support offered by fundamental developments. There are no domestic releases ahead of Thursday’s international trade data and near-term risk lies with the Fed and its impact on the broader market tone”.

“Bullish momentum indicators are suggestive of exhaustion at relatively muted levels, DMI’s are moderating, and ADX trend strength remains weak”.

“The 50 day MA (1.2821) support level is once again being threatened and we continue to highlight the importance of resistance around the 61.8% retracement level of the March-April decline (1.2897). Additional near-term support is expected at 1.2750”.