Canada: Softer local data will likely limit any selloff in USDCAD - TDS

Analysts at TDS suggests that the softer local data from Canada in today’s session could see CAD underperform on the crosses and will likely limit any selloff in USDCAD.

Key Quotes

“The wobbles in the greenback will continue to set the tone for the major currencies. We still think there is more room for the majors to consolidate against the greenback, given it has overshot most of the cyclical drivers we track.”

“Canadian data surprises are tracking nearly two standard deviations above the quarterly moving average, which is typically a sign of a turnaround in the data. We also note that markets are probably too sanguine about the policy outlook for the BoC so we expect the 2y interest rate differential to remain the key driver for USDCAD. This leaves us looking to use any drawdown as a buying opportunity with the pair trading slightly cheap to our high-frequency model. Strong support on any drawdown is seen near 1.3250.”