Major swing in USDCAD is likely a reversal and not a pullback. Here are the facts
BOC hiked rates back to back in order to remove last year back to back cuts. Poloz is likely to reiterate wait and see approach on data. COT positioning shows massive cad longs which have been unwinding since Friday as data failed and will likely continue to get squeezed on Dovish tones.
USD is currently a powerhouse with data, new fed head and tax cuts supporting inflows. Which makes the case for USDCAD to revisit July range of 1.27-28.
Oil is resilient and trading above $50 a barrel for most of October. However since the commodity is range bound we believe CAD has decoupled and thus will follow it’s own fate.
We believe that BOC will keep a wait and see approach in order to see how the latest hikes translate to the market. Furthermore CAD longs are exposed to further covering and thus CAD weakening further.
Good luck to us all