CAD Gains Momentum Against USD as Spreads Narrow
Scotiabank strategists Shaun Osborne and Eric Theoret believe the Canadian Dollar (CAD) is gaining strength against the US Dollar. They point to tighter US, Canada 2-year spreads and firmer commodity FX as reasons for this growth.
The CAD's current price of USD/CAD trading just below their fair value estimate around 1.3895 makes it a potentially lucrative opportunity for investors, according to Osborne and Theoret. Large speculative short CAD positioning may be squeezed further, contributing to the CAD's gains.
Technically, the strategists see aligned bearish momentum with a sustained break below 1.39 opening scope for a move toward 1.3817 and potentially the 1.35-1.37 range. Spread compression and downside targets are also motivating factors in the CAD's growth.