USD/CAD made another attempt at the lows but recovered quite swiftly. What’s next? Here is the view from TD:

Here is their view, courtesy of eFXnews:

D FX Strategy Research argues that the broad trend in the USD will set the tone in USD/CAD as the pair is undergoing a good recovery this week.

“Based on a 1y rolling regression, the returns in the BDXY have explained between 35% and 50% of the variance in the daily return of USDCAD over the past few months…

Recall, CAD has been one of the beneficiaries of the transition to convergence but we still think it has overshot this theme. Positioning and valuation proxies also show that it looks stretched, suggesting some room for consolidation this week. Notably, USDCAD held the lows and is starting to reverse higher,” TD adds.

Target-wise, TD is looking for the the current break of 1.26 to signal a retest of 1.2780.