Bank of America Merrill Lynch Research notes that USD/CAD has been fairly range bound, centered around the low 1.30s, since last autumn, and this range has held up amid both the bout of overall USD strength after the US election as well as its relatively recent weakness.
However, BofAML sees CAD as roughly 5% overvalued mainly on the back of CAD holding up relatively well compared to its core medium-term determinants, oil prices and US-Canadian interest rate differentials.
"Both of these factors have lately been pointing to a bit more CAD downside than recently seen in the market. Consequently, we continue to look for USD-CAD to finish the year at 1.39," BofAML projects.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
