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RBC Capital Markets Says USD/CAD Bias Remains Skewed Toward Top End Of 1.3500-1.3900 Range

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RBC Capital Markets said it expects USD/CAD to continue to trade within its expected range of 1.3500 to 1.3900 in the coming months, with the bias currently skewed toward the top of that range.

In its CAD Weekly Soundbites report, RBC said there "isn't a clear reason to sell the USD," noting that the US dollar remains "a relatively high yielder in G10," while there are "consistent flows into US assets" and the greenback continues acting as a safe haven.

"That leaves the path of least resistance for the USD toward a drift higher in the near-term, putting upward pressure on USD/CAD," RBC said.

The bank added that both the Federal Reserve and the Bank of Canada are on hold in the coming months, meaning "the relatively wide US-CA rate differentials are acting as a floor under USD/CAD."

RBC also noted that Canadian investors remained net buyers of foreign securities, including US assets, in March, "albeit at a much slower pace than in the past several months."

On technicals, George Davis of RBC said the break above "strong congestive resistance at 1.3728 argues for a greater correction toward secondary resistance levels at 1.3799 and 1.3869."

"We continue to favour fading such rallies based on the broader downtrend that is in place," Davis said.

He added that while initial support is located at 1.3728 and 1.3643, "prices will have to pierce a trendline at 1.3560 to reassert the downtrend."

"Reassess on a daily close above 1.3932," Davis added.

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