22 Jan 2015
USD/CAD might move towards 1.30 – TDS
FXStreet (Barcelona) - The TD Securities Team expects a USD/CAD move towards 1.30 and above is very likely as Fed moves to tighten rates.
Key Quotes
“Major policy divergences between the Fed and the BoC are very rare but that is effectively what USDCAD is looking at in the coming months, assuming the Fed stays on track to tighten policy in H2 of this year.”
“Alongside low oil prices, we have to reckon with more upside pressure on USDCAD in the next few weeks; 1.30 looks very reachable from here and an overshoot beyond that into the latter part of the year looks quite likely as the Fed moves to tighten rates.”
“Given the move to more policy accommodation outside of the US, the Fed deferring rate hikes is a risk. But that won’t be evident for some time and, well before that, the BoC is likely to have cut again (we now look for one more 25bps insurance cut in March). Against that backdrop, and aside from short-term trading bounces, there is no way back for the CAD.”
“Our fundamental equilibrium estimate of USDCAD fair value has risen to 1.2295 this morning—more or less in line with spot—reflecting wider US-Canada spreads in the belly of the curve; scope for a significant CAD bounce appears limited for the moment.”
“EURCAD weakness may be a drag on funds going forward to some degree, however, but that may only help USDCAD fill the gap on the short term chart between 1.2145/1.2245 left open yesterday; we think modest USDCAD dips are a buy. Gains through 1.2400, meanwhile, signal a resumption of the technical push higher.”
Key Quotes
“Major policy divergences between the Fed and the BoC are very rare but that is effectively what USDCAD is looking at in the coming months, assuming the Fed stays on track to tighten policy in H2 of this year.”
“Alongside low oil prices, we have to reckon with more upside pressure on USDCAD in the next few weeks; 1.30 looks very reachable from here and an overshoot beyond that into the latter part of the year looks quite likely as the Fed moves to tighten rates.”
“Given the move to more policy accommodation outside of the US, the Fed deferring rate hikes is a risk. But that won’t be evident for some time and, well before that, the BoC is likely to have cut again (we now look for one more 25bps insurance cut in March). Against that backdrop, and aside from short-term trading bounces, there is no way back for the CAD.”
“Our fundamental equilibrium estimate of USDCAD fair value has risen to 1.2295 this morning—more or less in line with spot—reflecting wider US-Canada spreads in the belly of the curve; scope for a significant CAD bounce appears limited for the moment.”
“EURCAD weakness may be a drag on funds going forward to some degree, however, but that may only help USDCAD fill the gap on the short term chart between 1.2145/1.2245 left open yesterday; we think modest USDCAD dips are a buy. Gains through 1.2400, meanwhile, signal a resumption of the technical push higher.”