12 Jan 2015
USD/CAD onwards and upwards - TD Securities
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities noted the current conditions surrounding the Canadian dollar.
Key Quotes:
"While tumbling oil prices continue to weigh on the CAD, the currency can take some small comfort in the fact that the “pincer attack” of weaker energy prices and wider (more USD-supportive) interest rate spreads has been mitigated somewhat by the slump in US yields over the past week, which has taken US-Canada spreads in the belly of the curve well off the late December/early January peaks."
"But if the CAD is not fighting a war on two fronts now, the battle against weaker oil prices will continue to take its toll; our FV estimate for spot has eased a little over the past week, reflecting some of the above-mentioned trends, allowing spot to “catch up” with the strongly rising trend in the FV estimate in the past few months. Spot is much closer to the FV equilibrium estimate of 1.1890 this morning, perhaps meaning that the rise in USD/CAD may slow near-term."
"But it is unlikely to reverse at this point, we think. Friday’s soft Canadian employment report should underscore the fact that if the Fed can remain “patient” before raising rates, the BoC likely has monetary policy patience in abundance at the moment."
"From a technical perspective, there is no sign that the trend higher in USD/CAD is poised to stall or reverse; quite the opposite, in fact. The underlying trend remains very constructive—reflecting in part the strong seasonal bias for USD strength in the early part of the year that we have highlighted previously. We look for firm support this week in the low 1.18 area and continue to think that funds risks pushing above the 1.20 area in the next few weeks before a deeper and broader consolidation risks setting in."
Key Quotes:
"While tumbling oil prices continue to weigh on the CAD, the currency can take some small comfort in the fact that the “pincer attack” of weaker energy prices and wider (more USD-supportive) interest rate spreads has been mitigated somewhat by the slump in US yields over the past week, which has taken US-Canada spreads in the belly of the curve well off the late December/early January peaks."
"But if the CAD is not fighting a war on two fronts now, the battle against weaker oil prices will continue to take its toll; our FV estimate for spot has eased a little over the past week, reflecting some of the above-mentioned trends, allowing spot to “catch up” with the strongly rising trend in the FV estimate in the past few months. Spot is much closer to the FV equilibrium estimate of 1.1890 this morning, perhaps meaning that the rise in USD/CAD may slow near-term."
"But it is unlikely to reverse at this point, we think. Friday’s soft Canadian employment report should underscore the fact that if the Fed can remain “patient” before raising rates, the BoC likely has monetary policy patience in abundance at the moment."
"From a technical perspective, there is no sign that the trend higher in USD/CAD is poised to stall or reverse; quite the opposite, in fact. The underlying trend remains very constructive—reflecting in part the strong seasonal bias for USD strength in the early part of the year that we have highlighted previously. We look for firm support this week in the low 1.18 area and continue to think that funds risks pushing above the 1.20 area in the next few weeks before a deeper and broader consolidation risks setting in."