CAD: room for more capitulation – RBC CM

USD/CAD has witnessed a sharp selloff in response to comments from BoC Senior Deputy Governor Wilkins, who questioned whether “all of the considerable monetary policy stimulus presently in place is still required” notes the analysis team at RBC Capital Markets.

Key Quotes

“Given that the strong economic performance of late has been characterized by a more favourable composition across regions and sectors, it has prompted the most hawkish signal that we have seen from the BoC in some time. With short CAD positions on IMM near a recent all-time high, the resulting bearish trend reversal below 1.3446 suggests room for more capitulation. While there are no data releases scheduled in Canada today, the subsequent move below the 200-dma at 1.3332 has shifted the focus down to 1.3217.”