USD/CAD rallied over 3% during November. Economists at Rabobank expect the pair to trade back in the 1.28-1.30.

USD/CAD and volatility, expect both to remain elevated

“The USD smile theory seems to be in play, so we are bullish USD regardless of whether the US continues to outperform and the Fed tightens policy, or if the global environment sours and global growth slows. The new omicron variant posing a tail risk that could trigger that second scenario.” 

“Despite being diverse environments, the outcome is likely to be the same; that is, USD outperformance. However, positioning is stretched and with volatility high we can certainly expect to see sizeable pullbacks.”

“Still, the trend for USD is likely to remain positive and as such we favor USD/CAD returning to the 1.28-1.30 range that dominated the back end of 2020.”

This article was originally published by Fxstreet.com.Read the original article here.

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