FXStreet reports that Avery Shenfeld from CIBC Capital Markets notes that the loonie rebounded from levels below the key 1.3500 psychological mark thanks to a turn in crude prices but such a move is not sustainable and expects USD/CAD to touch the 1.40 level. For year-end, the pair is forecast at 1.38.

“We’ve reduced our targets for C$ weakness ahead due to recovery in oil. However, we do not believe the Canadian dollar will be able to sustain that run, and will see 1.40 again at some point during this recovery.”

“Unlike the Eurozone or Japan, Canada entered this recession with a weak current account and trade balance, and the prior expansion’s lackluster growth in real exports suggests its overvalued on trade fundamentals.” 

“Canada’s overweight in energy points to a weaker 2020 starting point versus the US. Look for the Bank of Canada to pound home the message the output gap will remain wide over its full forecast horizon, implying a long wait for any move off near-zero rates, and helping to take some luster off the currency.”

“Q3 20: 1.39 | Q4 20: 1.38.”