CIBC Research discusses CAD outlook and notes that its fair value models put USD/CAD close to 1.40.

"Since the ﬁnancial crisis, the Canadian dollar has been trading stronger than our econometric model using commodity prices (both and energy and non-energy) and interest rate spreads would have implied. One factor not captured in that model was the greater attractiveness of Canadian securities to international investors, particularly given that Canada was one of the few countries to retain a AAA sovereign rating, which would have acted to support the currency," CIBC notes.

"However, last year saw the smallest net inﬂow into Canadian securities in a decade, with higher US Treasury issuance and scaling down of ECB QE purchases lower in the necessity of foreign investors to look abroad.

As such, there’s a clearer path for CAD to reach something closer to its modelled fair value, which is around USDCAD 1.40," CIBC adds.