USD/CAD: Clear push under 1.35 to solidify prospects for a substantial drop toward 1.33/1.34 – Scotiabank

CAD extends gains to a one-month high on the USD. Shaun Osborne, Chief FX Strategist at Scotiabank, expects the USD/CAD pair to plummet toward 1.33/34 on a sustained break under the 1.35 zone.

Backdrop looks CAD positive

“At month-end, there is a risk that CAD gains are related to short-term flows. However, if you combine (relatively extended CAD-bearish) positioning, valuation considerations, CAD-positive seasonals, some (developing) technical momentum and throw in the narrowest WCS/WTI spread in nearly a year and the idea of CAD gains having some sticking power is not so far-fetched. A positive risk backdrop adds to the bullish backdrop for the CAD too.”

“Technical damage has already been done to the USD by spot’s weakness under the 40-Day Moving Average (1.3584) I believe but a clear push under the 1.35 area would solidify prospects for additional CAD gains in the coming weeks towards 1.33/1.34. “