USD/CAD: CIBC believes the pair will soon go back up, targets 1.32 by end of this quarter

CIBC is preparing to buy the USD/CAD:

"The fall of the loonie since the beginning of the year is a source of concern for the BoC. But the BoC now faces the opposite problem. CAD has moved from biggest loser to winner among the G10 currencies over the past three months and is approaching levels that would endanger the changes occuring in the domestic economy, which is moving towards a model focused less on raw materials. The rise in the CAD was partly due to rising oil prices. But this force also reflects expectations relating to monetary policy. Markets have pushed back their rate cut expectations given the recent fiscal package and improved domestic statistics. The more dovish Fed is also to be considered. That said, the bulk of the rise of the CAD is probably behind us.

The BoC has declared open season on the CAD in its latest statement. Expect stronger language if the Canadian dollar appreciates further.

On the other hand, oil prices may become less directional in the coming months. Not to mention that some statistics are starting to suggest that the economic strength observed earlier this year could be temporary.

We should see the USD/CAD at around 1.30 and 1.35 in 2017, as the Fed raises its rates.

We are aiming for 1.32, 1.37 and 1.34 by the end of Q2, Q3 and Q4 respectively," says CIBC.