Barclays says USD/CAD could continue higher

Barclays Capital FX Strategy Research argues that as the relentless CAD rally has lost steam in the past couple of weeks, monetary policy expectations are unlikely to offer more CAD support given that the market has almost fully priced two hikes by BoC in a one-year horizon, while it prices only one hike for the Fed.

"Technical factors also augur USD/CAD upside.

This week is light on data, with no firsttier releases, although housing market data will be watched. The loonie is likely to keep following USD post-NFP momentum at the beginning the week, and US CPI, oil prices, Fed speak and sentiment on the greenback are likely to drive USDCAD later in the week. The next risk event for the CAD is the start of NAFTA negotiations on August 16," Barclays adds

"We expect it to depreciate modestly over the next quarters and USD/CAD to reach 1.29 by year-end," Barclays projects.

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