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- Canadian Dollar Will probably rally over medium-term

- Shorter-term it is seen as more 'rangebound'

- CAD supported after trade talks turnaround

The Canadian Dollar is likely to rally over the medium-to-long term according to analysts at Citibank, the largest FX dealer in the world.

However, in the short-term the USD/CAD pair is likely to remain rangebound between 1.3290 highs and the 1.2880 Fibonacci support level. Citi recommend buying USD at the lows and CAD at the highs, although long-term they remain bearish the pair (bullish CAD)."

CAD is tipped get a boost from a probable 0.25% rate hike from the Bank of Canada (BOC) in October, an expectation markets have not yet fully priced in, according to Citi.

Higher interest rates are generally positive for a currency as they lead to greater inflows of foreign capital drawn by the promise of higher returns.

Other potential drivers are, "oil price gains and potential USD mid-term weakness," say Citi although a headwind could be possible NAFTA negotiations and the imposition of more tariffs by the US.

Citi forecasts an exchange rate of 1.30 over the 0-3 month time period and 1.25 over the 6-12 month forecast period.

The current exchange rate is 1.3016.

From a technical perspective the pair may 'range-trade' between 1.2880 and 1.3290 in the short-term, due to a neutral RSI.

RSI is a momentum indicator which flags up oversold and overbought states, neither of which is signalled currently.

Citi's forecast is based on assumptions of an oil price of $79 per barrel.

The one major risk to the outlook for CAD are NAFTA risks, yet these too appear to have eased.

The Canadian Dollar rose overnight after NAFTA risk moderated following positive headlines.

Whilst previous reports had focused on how Canada was being left out of talks or 'snubbed' by the US which was concentrating on Mexico the most recent reports, from a press conference on Wednesday in which the chief negotiators from both Mexico and Canada were present stressed Canada's continued involvement.

The feedback from the two countries negotiators was positive after indicating all three countries were nearer a deal, after the US had softened its stance.

Canadian negotiator Colin Bird was also positive about "harnessing the power of trade agreements to promote higher wages in NAFTA" and that the "US, Canada, Mexico were very close on auto rules of origin”.

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