Credit Agricole CIB Research flags downside risk for USD/CAD in H2 targeting the pair at 1.35 by year-end.

"Risks initially flagged for 2026 have in the end not materialised, but new ones have  emerged, although these have hardly altered the course of the CAD so far this  year, which has largely matched our expectations," CACIB notes.

"Looking ahead, we stick to our  forecasts that see USD/CAD going into H226 around current levels and ending the  year near 1.35 as money markets may face a reality check regarding 2027,  especially in the US. That may not necessarily be enough to spur a major  turnaround in market positioning that has been consistently long USD/CAD in the  past two years on the likely basis of a historically large interest rate gap, while our  VALFeX estimate of around 1.32. long-term forecasts embed some mean reversal to our downwardly-revised," CACIB adds.