TD Research likes selling USD/CAD on rallies towards 1.35 targeting a break below 1.30 in 2021.
"While the election should heighten two-way risks in the weeks ahead, we prefer selling into rallies ahead of 1.35. Expect some speedbumps in the months ahead, but the next big move lies below 1.30 early next year," TD notes.
"Part of CAD undervaluation lies in the USD's overvaluation. Yet, there are idiosyncratic factors that the models flush out too. These structural flaws argue that CAD will lag on the crosses even if the reflation theme persists, and the USD stumbles in the quarters ahead. These models project a year-end finish around 1.32, followed by a gradual drift lower into next year. If markets are right on the election, USDCAD risks skew lower, though it lags on crosses," TD adds.