USD/CAD to extend its gains towards 1.2775/00 into the end of the week – Scotiabank

The USD/CAD drifts higher after losses stop in mid 1.26s again. Economists at Scotiabank expect the pair to edge higher towards the 1.2775/1.2800 area on a break above minor resistance at 1.2725.  

Tighter monetary policy conditions in Canada to support CAD gains later in 2022

“Short-term price action is turning a little more constructive for the USD again after three tests – and rejections – of the mid 1.26 area since the turn of the month.”

“Short-term price action reflects firm demand for the USD on dips to the 1.2650/60 zone in the past three days, with near-term risks tilting towards a push above minor resistance at 1.2725; gains through here may allow the USD to push higher still towards 1.2775/00 into the end of the week.”

“Fed policymakers have indicated that balance sheet normalization may not start until much later in the year (once the Fed Funds target rate has reached 1% or so). Relatively tighter monetary policy conditions in Canada should help support CAD gains.”