Mazen Issa, principal FX strategist at TD Securities, points out that they do not see a clear catalyst for a downside breakout of the USD / CAD pair and that they remain “committed USD bulls”. They consider that a lot of good news has a price in CAD.
“The high turnover of the USD / CAD has highlighted crucial support. So far, the pair has held 1.3850 / 70. This is the third time it has been tested as part of a larger descending triangle since the March highs. Thus, a break below this support would be bearish for the pair, especially if it was confirmed with DMA crossovers which would expose 1.3766. Meanwhile, a move across the resistance to the daily downtrend of 1.4050 / 80 will open the top extension. “
“We don’t see a clear catalyst for a bearish breakout, and we remain committed USD bulls. The flight premium for the USD decreased but did not erode, suggesting a certain timidity to bet entirely against the USD.
“The CAD has been strongly correlated with equities. In isolation, it is not a leg strong enough to stand up. “
“Rather, we think a lot of good news is already in the CAD price. The positioning is distorted, but we believe that these are of a strategic nature. Meanwhile, a large decline in the dollar seems well advanced on our measure. “