USD/CAD holds short-term neutral bias - Scotiabank

Eric Theoret, FX Strategist at Scotiabank notes that USD/CAD holds a neutral short-term bias. Scotiabank remains biased to medium-term gains however they  acknowledge the recent setback presented by last week’s remarkable turn and its continuation into Monday open

Key Quotes

“CAD is up on the day, rallying in an environment of risk appetite and broad-based USD weakness as market participants respond to shifting sentiment ahead of Thursday’s UK referendum on EU membership.” 

“This week’s domestic risks are limited to Monday’s wholesale trade data and Wednesday’s retail sales data for April, both set to improve following weakness in March. There are no scheduled Bank of Canada events, however we note the influence of broader developments in moderating expectations for BoC easing.” 

“Sentiment is likely to remain a dominant driver into the end of the week and we highlight risks surrounding the path for the 2Y yield spread as market participants consider the referendum result and its implications for the Fed. CAD risk reversals appear relatively steady with a sizeable premium for protection against downside risk.”

“USD/CAD short-term technicals: neutral—USDCAD has fallen below its 50 day (1.2856) with a decline toward the mid-point of its range from early May. We remain biased to medium-term gains however we acknowledge the recent setback presented by last week’s remarkable turn and its continuation into Monday NA open. We look to near-term support at 1.2780 and 1.2750, with resistance above 1.2900.”