This via Scotia Bank overnight (Monday morning note, CAD time)
CAD is quiet, consolidating in light pre-holiday trade with congestion centered just above the lower bound of its range from late October.
Yield spreads have widened in a CAD-negative manner, reflecting an impressive recovery in Fed rate expectations.
- Domestic rate expectations have firmed modestly and OIS are pricing roughly 9 bpts of tightening for January and 30bpts by April.
- This week's domestic risks include Thursday's CPI and retail sales, followed by Friday's monthly GDP for October.
- There are no scheduled Bank of Canada events.
CFTC data suggest a continued paring of CAD risk to both sides, and longer-term risk reversals remain elevated at the upper end of their recent range pricing in a relatively large premium for protection against CAD weakness.
USDCAD short-term technicals:
- neutral-USDCAD continues to trade within the ~1.2610-1.2920 range from late October.
- Momentum signals are neutral-bullish and trend strength is muted.
- Near-term resistance is limited ahead of 1.2920.
- We highlight the 200 day MA at 1.2936 and note the absence of any further resistance ahead of 1.30.
- Near-term support is expected between 1.2820 and 1.2780.
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Dunno about anyone else, but a glance at the daily USD/CAD chart suggests to me 1.2920-ish is vulnerable
