15 Jun 2015
USD/CAD rally stalling – TDS
FXStreet (Barcelona) - Highlighting the key risks ahead for CAD, FX Strategists at TD Securities believe that the USD/CAD rally appears to be stalling, but a bit of upside might be expected as their fair value estimate for the pair remains around 1.2450.
Key Quotes
“USDCAD looks to have steadied for now, and with the Fed decision midweek we are unlikely to see much movement in the currency pair until then though our short-term fair value estimate indicates that there is a little bit of upside from here (~1.2450). WTI oil is under pressure this morning and that seems to have impact on CAD but we do not think there will be much traction ahead of the FOMC meeting.”
“We warned last week that the USDCAD rally looks to have stalled, recommended taking profits on longs taken since the 1.1950 level but we would look to re-load around the 1.22 level. The data this week is likely to reinforce that narrative.”
“Today’s April manufacturing sales report should show a 0.5% m/m decline but Friday’s data double header in CPI and retail sales should be CAD supportive.”
“The Fed meeting on Wednesday is the obvious risk and with Greek negotiations tense and taking a turn for the worse, we could see some flows into US and provide a lift to USDCAD if the FOMC uses this meeting to set up for future rate hikes. This latter risk is our base-case but we are reluctant to view the potential USD lift as truly sustainable with summer markets looming and concern about dollar strength from international officials.”
“So while we anticipate that most currencies will shy away from trading meaningfully away from current levels. The same can be said for CAD crosses though we think that after taking out key support around 0.8660 in NZDCAD following the RBNZ cut last week, there may be more downside ahead for this currency pair.”
Key Quotes
“USDCAD looks to have steadied for now, and with the Fed decision midweek we are unlikely to see much movement in the currency pair until then though our short-term fair value estimate indicates that there is a little bit of upside from here (~1.2450). WTI oil is under pressure this morning and that seems to have impact on CAD but we do not think there will be much traction ahead of the FOMC meeting.”
“We warned last week that the USDCAD rally looks to have stalled, recommended taking profits on longs taken since the 1.1950 level but we would look to re-load around the 1.22 level. The data this week is likely to reinforce that narrative.”
“Today’s April manufacturing sales report should show a 0.5% m/m decline but Friday’s data double header in CPI and retail sales should be CAD supportive.”
“The Fed meeting on Wednesday is the obvious risk and with Greek negotiations tense and taking a turn for the worse, we could see some flows into US and provide a lift to USDCAD if the FOMC uses this meeting to set up for future rate hikes. This latter risk is our base-case but we are reluctant to view the potential USD lift as truly sustainable with summer markets looming and concern about dollar strength from international officials.”
“So while we anticipate that most currencies will shy away from trading meaningfully away from current levels. The same can be said for CAD crosses though we think that after taking out key support around 0.8660 in NZDCAD following the RBNZ cut last week, there may be more downside ahead for this currency pair.”