3 Feb 2015
Macro trade setup for USD/CAD – JPM
FXStreet (Barcelona) - The JP Morgan Research Team gives the macro trade setup for USD/CAD, suggesting to get long at current levels.
Key Quotes
“The Canadian OIS market is pricing in a 50-60% chance of another BoC cut on March 4. We are more dovish and believe a second “insurance” cut is 75% likely, with the key risk to our view being a V-shaped increase in crude prices over the next few weeks.”
“Last week’s brief statement mentioned ‘oil’ ten times and the insurance cut demonstrated the BoC’s focus on mitigating downside risks from the oil patch slump, especially given that we have so far only witnessed the tip of the iceberg in terms of direct damage (especially regarding energy-sector capex and employment).”
“The US-Canada 2-year spread currently suggests USD/CAD at 1.27. If the BoC cuts at its next meeting, we expect the 2-year spread to increase by 5 to 10bps, implying an extension in USD/CAD to 1.29‒1.30.”
“Buy USD/CAD at 1.2690, stop at 1.2437.”
Key Quotes
“The Canadian OIS market is pricing in a 50-60% chance of another BoC cut on March 4. We are more dovish and believe a second “insurance” cut is 75% likely, with the key risk to our view being a V-shaped increase in crude prices over the next few weeks.”
“Last week’s brief statement mentioned ‘oil’ ten times and the insurance cut demonstrated the BoC’s focus on mitigating downside risks from the oil patch slump, especially given that we have so far only witnessed the tip of the iceberg in terms of direct damage (especially regarding energy-sector capex and employment).”
“The US-Canada 2-year spread currently suggests USD/CAD at 1.27. If the BoC cuts at its next meeting, we expect the 2-year spread to increase by 5 to 10bps, implying an extension in USD/CAD to 1.29‒1.30.”
“Buy USD/CAD at 1.2690, stop at 1.2437.”