USD/CAD: Demagnetizing of the 1.35 handle to prove to be a short-lived phenomenon – Rabobank

The outlook for USD/CAD is now very muddy. Tthe confirmed close below 1.3260 is a major event. Economists at Rabobank have updated their forecasts.

Short term forecasts revised lower to reflect a move back to 1.33 in the coming weeks

In light of recent price action, we have revised our short term forecasts lower to reflect a move back to 1.33 in the coming weeks, and then a return to the 1.35 magnet on a three-month basis but this will require a confirmed close above that critical 1.3260 that implies the move down through the bullish trend was a false breakout. 

Should we see a move below 1.30, we will need to revise our outlook substantially to reflect a sustained period of trading within the 1.28 to 1.30 region. But to be clear, this is not our base case, and instead, we expect the demagnetizing of the 1.35 handle to prove to be a short-lived phenomenon.