Eric Theoret, FX Strategist at Scotiabank, keeps the bullish stance on the pair and sees a potential visit to the 1.3600 handle in the near term.

Key Quotes

“Oil had been a crucial pillar of support offsetting the material drag from relative central bank policy and interest rate differentials. The loss of this support leaves CAD vulnerable, with a 2Y U.S.-Canada spread hovering around 53bpts at levels last seen in January 2016 (when USDCAD was trading in the lower 1.40s). A reminder of the added vulnerability from extended bullish CAD positioning with a CFTC net long sitting at fresh multi-year highs”.

“Options markets are responding and measures of implied volatility are showing signs of a broad turn, with some tenors swiftly reversing from multi-year lows. We remain bearish CAD (bullish USDCAD, targeting 1.40 for Q2)”.

“Momentum signals are extremely bullish and providing confirmation to the impressive rally in spot. The RSI is at 74, still well below the extended levels seen in late December 2015 and early January 2016. We continue to highlight the absence of resistance ahead of 1.36 and note that a break would open of the risk of a push toward the mid-1.38s”.