The Canadian dollar is starting to trade at a nice discount, in the view of analysts at TD Securities. They recommend selling USD/CAD on rallies toward the 1.28 level.

“Our dashboard shows a weak but improving fundamental story.”

“MRSI’s extreme implied short CAD position has improved, though it remains underweight against other currencies. That said, CAD’s trading with a nice discount on the balance of valuation (HFFV and GMPCA) positioning models.”

“We’re likely nearing the top in USD/CAD, where we prefer to sell rallies back towards 1.28.”

“The loonie is likely waiting for the return of some form of reflation-lite this fall, with potentially some BoC-inspired carry support.”

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