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USD/CAD: up to 1.16?

USD/CAD surged to new highs above $1.1150. The Bank of Canada left the overnight rate target unchanged at 1.0%, but its tone has become more dovish. Canadian dollar weakened as the regulator said that CAD “remains strong”.

Scotia Bank says that given prospects for wider interest rate differentials between the US and Canada in the months ahead, “there is no reason why we can't see 1.14, 1.15 and 1.16.”

CitiFX also mention 1.16 and higher saying that the weekly close above 1.0850 gave USD/CAD a positive boost. The specialists point out that 1.16 is the reversed head-and-shoulders target (see the weekly chart).

Nomura expects USD/CAD to rise gradually in the coming months to 1.1500 by the end of Q3. The bank underlines that the BOC’s willingness to cut rates has increased, but the threshold for the regulator to remains high because of household imbalances and slightly higher growth outlook: “Further underperformance of inflation are unlikely to be sufficient to justify a cut and would require a weakening in the growth outlook.”

Chart. Weekly USD/CAD

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