12 May 2015
USD/CAD dips remain a buy – TDS
FXStreet (Barcelona) - FX Strategists at TD Securities maintain their buy-on-dips bias on USD/CAD, noting that their fair value estimate for the pair stands around 1.2170.
Key Quotes
“We still feel like the balance of risk is skewed towards the upside for USDCAD; we have noted here several times before that we think Canada will struggle to grow above trend for most of the year and the Bank of Canada’s growth forecast in the April Monetary Policy Report are setting us up for disappointment.”
“Though we do not expect cuts from the Bank, we still feel like the risk around the overnight rate is slightly tilted to the downside and the market has gone too far in effectively pricing-out easing this year especially with the US economy still tracking sub-trend growth in Q2.”
“The daily model estimate for USDCAD points to a value around 1.2170 and is heavily being influenced by spreads.”
“We think the broader tone in sentiment around fixed income leave funds prone to snap back higher from here. As such, we still advocate buying USDCAD on dips given where spreads are trading and on a fundamental basis (i.e. growth may struggle more than what the BoC has projected).”
“The 1.1950 support level has been tested twice recently and has so far been met with solid interest. We expect this hold.”
Key Quotes
“We still feel like the balance of risk is skewed towards the upside for USDCAD; we have noted here several times before that we think Canada will struggle to grow above trend for most of the year and the Bank of Canada’s growth forecast in the April Monetary Policy Report are setting us up for disappointment.”
“Though we do not expect cuts from the Bank, we still feel like the risk around the overnight rate is slightly tilted to the downside and the market has gone too far in effectively pricing-out easing this year especially with the US economy still tracking sub-trend growth in Q2.”
“The daily model estimate for USDCAD points to a value around 1.2170 and is heavily being influenced by spreads.”
“We think the broader tone in sentiment around fixed income leave funds prone to snap back higher from here. As such, we still advocate buying USDCAD on dips given where spreads are trading and on a fundamental basis (i.e. growth may struggle more than what the BoC has projected).”
“The 1.1950 support level has been tested twice recently and has so far been met with solid interest. We expect this hold.”