USD/CAD: Door open for weakness to stretch further in the short run – Scotiabank

USD/CAD has declined toward the 1.33 level. Economists at Scotiabank analyze the pair’s outlook.

Positioning remains a potential driver of additional CAD gains

Spreads look set to continue compressing in the CAD’s favour in the weeks ahead which suggests the CAD can continue to push higher.

Last week’s CFTC data showed that a very large net CAD short position among speculative, real money and hedge fund traders remains intact. Short covering could still give the CAD a shove higher in the coming weeks.

Seasonal trends leave the door open for a short, sharp move lower in USD/CAD right into the last days of the calendar year (perhaps before a consolidation in Q1). 

Broader USD weakness plus late year liquidity and volatility issues leave the door open for USD/CAD weakness to stretch further in the short run.