13 Feb 2015
Bullish on USD/CAD – TDS
FXStreet (Barcelona) - Shaun Osborne, Chief FX Strategist at TD Securities, remains bullish on USD/CAD, but notes that a short-term downside risks exists for the pair below 1.2450.
Key Quotes
“We remain bullish on the outlook for USDCAD, mainly because we see US-Canada spreads as very supportive for the USD at present and perhaps risk becoming more of a driver for the exchange rate if commodities do stabilize."
“Our USDCAD FV model (based on 5-year spreads and terms of trade input) suggests a spot equilibrium level of 1.2630 currently, based on data as of last night’s close.”
“FV based on 2-year spreads, which have shown a strengthening correlation with spot in recent months, suggests FV is 1.3230.”
“Either way we look at it this morning, USDCAD is either a little or quite a lot undervalued. But still, we cannot have to concede the risk of a short-term correction lower in funds is perhaps building, alongside the potential for a rebound in EURUSD.”
“Pressure on commodities may abate in the next week or so as Asian activity slows into the Lunar New Year approaches (February 19th) and US yields may not be able to make much more progress until the market gets clarification on the Fed’s thinking at Fed Chair Yellen’s congressional testimony towards the end of the month.”
“On the charts, we think downside risks increase of USDCAD in the short run below 1.2450 (hourly support). Topside, we see resistance between 1.2545/75.”
Key Quotes
“We remain bullish on the outlook for USDCAD, mainly because we see US-Canada spreads as very supportive for the USD at present and perhaps risk becoming more of a driver for the exchange rate if commodities do stabilize."
“Our USDCAD FV model (based on 5-year spreads and terms of trade input) suggests a spot equilibrium level of 1.2630 currently, based on data as of last night’s close.”
“FV based on 2-year spreads, which have shown a strengthening correlation with spot in recent months, suggests FV is 1.3230.”
“Either way we look at it this morning, USDCAD is either a little or quite a lot undervalued. But still, we cannot have to concede the risk of a short-term correction lower in funds is perhaps building, alongside the potential for a rebound in EURUSD.”
“Pressure on commodities may abate in the next week or so as Asian activity slows into the Lunar New Year approaches (February 19th) and US yields may not be able to make much more progress until the market gets clarification on the Fed’s thinking at Fed Chair Yellen’s congressional testimony towards the end of the month.”
“On the charts, we think downside risks increase of USDCAD in the short run below 1.2450 (hourly support). Topside, we see resistance between 1.2545/75.”