The fall in oil prices may not be the end of troubles for the Canadian dollar this week. The team at Citi sees a selling opportunity:

Here is their view, courtesy of eFXnews:

Currency investors should consider buying USD/CAD this week, advises CitiFX in its weekly FX pick to clients.

“Overall our bullish USDCAD view this week is driven by several factors: oil, likely risk-off across markets, US & CAD employment.

With Poloz and Wilkins both speaking, there is a chance for qualitative risk driving a weaker CAD as well.

Tuesday, Governor Poloz delivers a speech on ’25 years of Inflation Targets: Certainty for Uncertain Times. Poloz should discuss the decision to drop the CPIX for three alternative measures of underlying inflation. Q&A and press conference are to follow, so there is a risk that the Governor will tack more dovish compared to his recent comments.

In Canada, GDP on Tuesday and the job report on Friday are the data highlights. It is very likely that Canada’s labor report is weak (especially in full time) and stands out compared to a stronger US NFP.

Broadly, we want to point out that markets may be vulnerable to ‘risk off’ or defensive trading. Note on Thursday FX markets broke through the lows in ADXY. Oil is trading below $50/bbl again. S&P is at the lows for September. Italian and Spanish CDS jumped on Friday. These are all signs of further defensiveness(with equity (with equities being the most critical for a risk/EM view.) This flags bearish risks moving forward.

Over the weekend – headlines were that an OPEC deal remains elusive, which could further weigh on oil prices early this week,” Citi says as a rationale behind this call.

Citi recommends buying USD/CAD at 1.3415 with a stop at 1.3305, and a target at 1.3595.*

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