TD FX Strategy Research notes that USD/CAD continues to trade in excess of its high-frequency trading value estimates.
"The US is trading with a bit of a premium but we think the CAD leg has started to price in some negative NAFTA risks.
still, the news that NAFTA discussions will extend into next year offered a good signal to fade some of the rising risk premium, which saw a broad-based decline in the $. Also keep in mind that while many have focused on CAD this week, it is unchanged against the $ as European currencies have led the selloff," TD notes.
"We continue to think USDCAD is sitting at good risk/ reward levels to sell the pair ahead of next week’s BoC meeting," TD argues.