17 Feb 2015
USD/CAD to consolidate near-term, but overall trend still higher – BAML
FXStreet (Barcelona) - The Research Team at BofA-Merrill Lynch, views that with CAD being less overvalued at current levels, near-term consolidation can be expected from USD/CAD, while BoC’s risk management approach and falling oil prices will keep CAD pressurized.
Key Quotes
“With oil prices stabilizing, CAD is less overvalued at current levels with USD-CAD having moved significantly higher already. As a result, we believe USD-CAD will likely trade near current levels or slightly higher in the near-term consistent with our end-1Q forecast of 1.23.”
“However, we continue to believe CAD will remain under pressure as oil prices will likely fall further, and the risk management approach of the BoC pushes it in the direction of an easing bias.”
“Contrasted with increasing risks of a June Fed rate hike, policy differentials will also keep pressure on the currency.”
“Our Quant metrics and positioning indicators continue to suggest an upward trend in USD-CAD, while speculative short positioning is has some room to grow.”
“We recently closed our two short CAD trades (USD/CAD 1.27 call and USD/CAD cash long), and await better levels to re-engage in the pair.”
Key Quotes
“With oil prices stabilizing, CAD is less overvalued at current levels with USD-CAD having moved significantly higher already. As a result, we believe USD-CAD will likely trade near current levels or slightly higher in the near-term consistent with our end-1Q forecast of 1.23.”
“However, we continue to believe CAD will remain under pressure as oil prices will likely fall further, and the risk management approach of the BoC pushes it in the direction of an easing bias.”
“Contrasted with increasing risks of a June Fed rate hike, policy differentials will also keep pressure on the currency.”
“Our Quant metrics and positioning indicators continue to suggest an upward trend in USD-CAD, while speculative short positioning is has some room to grow.”
“We recently closed our two short CAD trades (USD/CAD 1.27 call and USD/CAD cash long), and await better levels to re-engage in the pair.”