Bank of America Merrill Lynch Research discusses USD/CAD outlook and adopts a structural bullish bias over the medium-term.
"We still think that the balance of risks remains heavily skewed to the upside for USDCAD and have adjusted our forecast accordingly. US-Canada trade relations have unfortunately taken a turn for the worse, just as time is running out for a quick deal on NAFTA.
This combination of sharp policy divergence and capital flow sudden stop would send USD-CAD quickly above 1.40. We also see the risk of escalation in trade war rhetoric as supportive of USD-CAD.
Our revised forecast calls for a rise in USD-CAD to 1.37 in 3Q as it converges to its medium term fair value of 1.40 in 4Q," BofAML argues.