USD/CAD is on its way to the lowest weekly close since February below 1.3400. Analysts at MUFG Bank see that the Canadian Dollar has some scope in the short term to outperform. 

Key quotes:

“We have been somewhat cautious over the prospects for CAD and indeed over the year as a whole, we suspect CAD will be a laggard versus most of G10 but taking a short term horizon we do see some scope for CAD to outperform.”

“We don’t expect any additional rate hikes but the resilience of the economy and the BoC’s modestly more hawkish communication this week has helped keep the USCA 2yr swap at levels supportive for further USD/CAD declines.”

“Our rates/crude oil short-term regression model indicates scope for USD/CAD to fall a couple of big figures from here. The IMM analysis below also reveals that CAD shorts are most stretched based on our z-score analysis and that could prompt some CAD buying as well.”