Canadian Dollar: Trade surplus supports cautious outlook – RBC
Royal Bank of Canada’s (RBC) Nathan Janzen notes Canada’s trade balance swung to a $4.2 billion surplus in August, helped by higher energy prices and a rush of exports to the United States (US) ahead of new tariffs.
The Canadian Dollar (CAD) has been trading range-bound against the US Dollar, showing little reaction to the recent Quebec provincial election, according to Scotiabank strategists Shaun Osborne and Eric Theoret. Political risks, primarily the potential for a referendum in Quebec and another in Alberta, are seen as a medium-term headwind for the CAD.
The USD/CAD rally appears to be technically stretched, with signals of a potential bearish reversal and limited support between current levels and the 1.40 area. With the PQ winning the provincial election in Quebec, there is a possibility of a governing majority, but the medium-term risks remain concerning due to the PQ leader's promise to hold another secession referendum after the end of the current US administration.
The result of the Alberta referendum on October 19 poses a significant risk for the CAD's sentiment. Currently, risk reversals are relatively muted, and the USD/CAD rally seems to be exhausted, with bearish reversal signals observed over the past few sessions.
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