19 Jun 2014
USDCAD testing the low end of the range - TD Securities
FXStreet (Łódź) - As the TD Securities FX research Team point out, USDCAD has emerged from the FOMC meeting in a little worse shape, reflecting the build up of hawkish expectations running into the Fed meeting that were ultimately disappointed by Chair Yellen’s rather balanced approach to the outlook.
Key quotes
"The USD has experienced a broad sell off since yesterday afternoon and US yields have backtracked a little—US 10 year yields are resting on key short-term support around the 2.57% which may hold the key to the USD’s outlook. Softer yields still may pressure the USD more though we rather contend that the USD is still likely to find support on weakness."
"US-Canada spreads in the belly of the curve have narrowed modestly but remain in USD-supportive territory at around +10bps for the 5-year sector of the curve."
"That has prompted a modest bounce in our fair value assessment of the CAD but our regression of 5-year spreads and Canadian terms of trade is still suggesting that USDCAD should be trading closer to 1.12 than 1.08."
"We think the short-term price action is looking at little more constructive for the USD as the North American session gets underway and, in broader terms, the USD is starting to look quite oversold on the longer-term charts."
"We look for firm support in the low 1.08 zone intraday. The USD’s technical position improves a bit more obviously above 1.0900/20 from here but that looks fairly distant at this point. Ahead of the CPI data tomorrow, we doubt funds will make much headway beyond 1.0840/50."
Key quotes
"The USD has experienced a broad sell off since yesterday afternoon and US yields have backtracked a little—US 10 year yields are resting on key short-term support around the 2.57% which may hold the key to the USD’s outlook. Softer yields still may pressure the USD more though we rather contend that the USD is still likely to find support on weakness."
"US-Canada spreads in the belly of the curve have narrowed modestly but remain in USD-supportive territory at around +10bps for the 5-year sector of the curve."
"That has prompted a modest bounce in our fair value assessment of the CAD but our regression of 5-year spreads and Canadian terms of trade is still suggesting that USDCAD should be trading closer to 1.12 than 1.08."
"We think the short-term price action is looking at little more constructive for the USD as the North American session gets underway and, in broader terms, the USD is starting to look quite oversold on the longer-term charts."
"We look for firm support in the low 1.08 zone intraday. The USD’s technical position improves a bit more obviously above 1.0900/20 from here but that looks fairly distant at this point. Ahead of the CPI data tomorrow, we doubt funds will make much headway beyond 1.0840/50."