CAD remains under pressure

The CAD continues to be on the defensive as we head into the Bank of Canada (BoC) meeting.

Canadian Dollar
Source: Bloomberg

Recent volatility in oil prices hasn’t done Canada any favours and perhaps this will force the BoC to adopt a more dovish bias with extreme caution being exercised. The country is facing a benign inflation outlook and the sharp falls in oil and gas prices will negatively impact growth expectations.  This in turn has put pressure on the CAD, particularly against the greenback where the divergence just continues to grow. USD/CAD squeezed through the $1.2000 barrier with the momentum remaining skewed to the upside. The pair traded as high as $1.2115, its highest since April 2009 and remains quite firm in Asia. Given there was some consolidation in the $1.2000 region, I continue to feel buying the pullbacks is the best way to play the pair. This region now presents support and given the RSI suggests the pair is overbought at the moment, I feel pullbacks present the best risk-reward proposition.

 

USD/CAD
Click to enlarge

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