[Calxy]

CAD bulls need not rely on commodity price increases alone to reach USD/CAD parity. Interest rates will play an integral part during the next six months to assist the move lower.

Although the BoC will not be part of the “early” hikers in this cycle, it should become increasingly clear that the BoC will raise interest rates well ahead of the Fed and once it embarks on the normalization path, rate hikes will likely be more aggressive than the Fed.

The market is not yet priced for such a scenario and some traders recommend entering a strategic short USD/CAD position to take advantage of this mispricing. However, following the strong employment data earlier today and the subsequent selloff in USD/CAD, we will wait for more opportune levels to enter this trade.