The Canadian dollar is drifting a little after failing to hold gains against the USD below the 1.27 level on Tuesday. Economists at Scotiabank remain bullish on the loonie, however, USD/CAD may lurch higher in the short-term to test the 1.2750 mark.

USD/CAD continues to consolidate

“We remain constructive on the CAD outlook – given the prospect of fairly rapid BoC tightening this year. But we do expect seasonal trends to keep the CAD trading more defensively in the early part of the new year.”

“Spot remains in a downtrend on the short-term charts, following the late Dec rejection of 1.29+ levels. We think this is a bullish cue for the CAD in the medium-term but, in the short run, the downtrend suggests intraday resistance at 1.2750.”

“We continue to see support near yesterday’s low around 1.2620/30.”