MUFG Research maintains a short USD/CAD position in its ToTW portfolio targeting a move towards 1.2950.

"We open a short USD/CAD trade idea on Friday based on our rates/crude oil regression model indicating the current spot rate was signalling that USD/CAD spot has scope to drop by a few big figures. That divergence has closed a little but more reflecting the move higher in US yields as the markets position for another 25bp rate hike by the Fed. The model still points to downside scope for USD/CAD although further moves higher in US yields, especially if that move higher hits risk and crude oil prices, would likely see the divergence close further and reduce the near-term downside scope for USD/CAD," MUFG notes.

"The technical backdrop was also favourable after a breach of the 200-day moving average last week. The current spot rate remains marginally below that level," MUFG adds.