TD Research argues that near-term dynamics point to USD/CAD is likely to remain hovering around the predicable 1.32-1.36 range with a bias to trade near the lower end in Q3.
“This reflects the fact that even though the BoC surprised markets with its shift in language around the removal of insurance cuts, it now priced to run parallel to the Fed over the next two years. Interest rate levels also remain a headwind, especially as $ betas to rates are still elevated and we expect a squeeze in G10FX,’ TD adds.
TD also notes USD/CAD also looks cheap with its High-Frequency-Fair Value Model (HFFV) arguing for a push back to 1.34.
Source: TD Securities Research
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