USD/CAD: bias changed from bearish to neutral - Rabobank

According to analysts from Rabobank see room from US-Canada yields to widen further and thus providing some support for USD/CAD and pushing the pair back up to 1.30 on a 9-12m perspective. 

Key Quotes: 

“It has been a whippy ride for USD/CAD of late. USD/CAD traded a low of 1.2251 in early February and a high of 1.3125 in mid-March. The pair currently sits in the upper half of that range at 1.29. The CPI inflation report was the catalyst for the sharp move lower in USD/CAD on March 21st but it is worth noting that from a technical analysis perspective we had a sell signal three days earlier triggered by bearish divergence between the price action and the relative strength index (RSI) indicator.”

“Short term resistance can be found at 1.2892 ahead of the 1.30 handle and the recent high of 1.3125. A confirmed closed above there would open up 1.32.” 

“Momentum indicators are now in neutral territory and we have shifted our own bias from ‘bearish’ USD/CAD to ‘neutral’. On the downside, the broad range is 1.2660-1.2921 and we expect this region to dominate price action in the coming months as it did back in Q4 of last year.”

“Furthermore, our short-term Rabo USD/CAD Market Model points to a move down to 1.28 in the next month. Looking further out, we see room for short end interest rate differentials to widen further thus providing some support for USD/CAD and pushing the pair back up to 1.30 on a 9-12m view.”