27 Jan 2015
Soft crude and a strong dollar might drive USD/CAD towards 1.30 – MP
FXStreet (Barcelona) - Dean Popplewell, Director of Currency Analysis at MarketPulse, notes that CAD bears may push the USD/CAD pair higher towards 1.30 quickly on a break above 1.25levels, with investors still moving alongside strong USD and weaker commodity trend.
Key Quotes
“The CAD or loonie is trying desperately to bounce of its six-year lows as crude prices attempt to reverse some of this year’s recent losses. The temporary rise in crude prices have been supported by a report that OPEC’s top officials believe that they may have hit a bottom. In other words, crude officials are trying to walk the commodity’s prices higher. The problem is that the official’s argument does not trump the reality of a product glut.”
“Oil prices have been the loonies’ biggest driver year-to-date. If crude prices do happen to stabilize (down -55% over the past six-months) then the CAD is expected to find some much needed help.”
“Last week, the BoC’s Governor Poloz tried to play catch up with weaker commodity prices, especially crude, by slashing overnight interest rates (-0.25bps to +0.75%), citing his actions as an insurance policy against a collapse in crude prices.”
“With Canada being a commodity sensitive exporter, any negative longer-term fluctuations in commodity prices will have a massive impact on Canadian growth and inflation and so too do yield spreads. Wider US/CAD bond yield spreads will always hurt the loonie.”
“Technically, the USD has found resistance at the key $1.25 level. Nevertheless, the majority of investors remain better buyers of USD’s on pullbacks, believing that the USD bull market and weaker commodity trend remains intact.”
“Through $1.25 will have the CAD ‘bear’ honing in on the next major CAD support level at $1.30 rather quickly.”
Key Quotes
“The CAD or loonie is trying desperately to bounce of its six-year lows as crude prices attempt to reverse some of this year’s recent losses. The temporary rise in crude prices have been supported by a report that OPEC’s top officials believe that they may have hit a bottom. In other words, crude officials are trying to walk the commodity’s prices higher. The problem is that the official’s argument does not trump the reality of a product glut.”
“Oil prices have been the loonies’ biggest driver year-to-date. If crude prices do happen to stabilize (down -55% over the past six-months) then the CAD is expected to find some much needed help.”
“Last week, the BoC’s Governor Poloz tried to play catch up with weaker commodity prices, especially crude, by slashing overnight interest rates (-0.25bps to +0.75%), citing his actions as an insurance policy against a collapse in crude prices.”
“With Canada being a commodity sensitive exporter, any negative longer-term fluctuations in commodity prices will have a massive impact on Canadian growth and inflation and so too do yield spreads. Wider US/CAD bond yield spreads will always hurt the loonie.”
“Technically, the USD has found resistance at the key $1.25 level. Nevertheless, the majority of investors remain better buyers of USD’s on pullbacks, believing that the USD bull market and weaker commodity trend remains intact.”
“Through $1.25 will have the CAD ‘bear’ honing in on the next major CAD support level at $1.30 rather quickly.”