Last week, USD/CAD rose 3.4% to Friday’s high of 1.2949. Back in mid-July, USD/CAD completed a cup and handle formation with an implied target of 1.2956. Rabobank’s initial target back then stood at 1.2670, and after trading through that level, the pair returned to a period of consolidation before last week’s bullish breakout. The Dutch bank has rolled forward its USD/CAD forecast so the one-month projection is now at 1.27 and the three-month projection is at 1.28.
The 1.26 handle offers key support
“In terms of short-term price action, the 1.26 handle should offer key support as the three-month bullish trendline, while below there, 1.2554 is the 200-day moving average. We see this as a likely line in the sand for USD/CAD selling and expect the pair to primarily trade in the 1.2650 to 1.2750 region in the lead up to Friday’s Jackson Hole meeting.”
“We still see room for USD/CAD to edge higher and expect the pair to trade north of 1.28 again before year-end, but despite our constructive view on USD, we do not foresee USD/CAD breaking north of 1.30 and CAD upside as likely to keep USD/CAD in check.”
“We expect CAD to outperform most of its commodity currency peers in the coming weeks as domestic activity picks up and the acceleration of the vaccine rollout leaves the economy less vulnerable to renewed lockdowns.”
“Although CAD has been trading more closely to a broader index of commodities of late, the link to oil remains important and we see room for more support coming from the energy complex in the coming months. We see oil prices strengthening into year-end despite the recent washout of systematic traders.”
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