Loonie looks cheap and should be trading somewhat higher than it is – Scotiabank

Resistance to USD/CAD advancing beyond the mid-1.34 zone has been pretty consistent over the past week. Economists at Scotiabank analyze the pair’s outlook.

Risks tilted towards additional gains

At the risk of sounding like the proverbial broken clock, the CAD looks cheap and should be trading somewhat higher than it is. Very stretched valuation suggests near-term scope for the USD to extend should be limited, all else equal.

Intraday trading patterns reinforce the picture of firm resistance in the mid-1.34 zone but, taking a step back, the underlying bull trend in the USD has developed solidly on the short-term studies which suggest spot will remain well supported for now and tilts risks towards additional gains – eventually. 

Support is 1.3375, with some relief for the CAD likely to develop below here.