Much of the CAD upside has come over recent sessions with USD/CAD losing ground during 14 of the last 16 trading days. Economists at Rabobank expect the pair to edge lower towards 1.24 over the next quarter.

Room for USD/CAD to rise back above 1.26 in the second half of 2022

“We have revised our USD/CAD forecasts down to 1.25 on a one-month basis and 1.24 in three months' time. This reflects a trifecta of factors. First, the aggressive repricing of the front-end of the curve. Second, there is the likely persistence of higher oil prices, which we expect to return to 125. And third, there is the potential for CAD to play catch-up on the crosses.” 

“We must highlight a significant risk to the short-term lower USD/CAD call: namely, the potential for safe-haven flows driving USD higher. Further out, we see room for USD/CAD to rise back above 1.26 and we remain constructive of USD in general.”