USD/CAD: Upside momentum has stalled - Westpac

Richard Franulovich, Research Analyst at Westpac, explains that USD/CAD’s upside momentum has stalled despite continued poor atmospherics including ongoing mortgage lender woes, a trade dispute with the US over softwood lumber and dairy exports and softer data on jobs and housing starts/permits.

Key Quotes

“Stability in crude oil prices along with aggressive CAD short positioning (IMM net speculative CAD shorts hit 15 month highs last week) will explain much of CAD’s resilience in recent sessions in the face of clear negatives.”

“USD/CAD can trade down to 1.35/1.36 but 1.40 still more likely before 1.30. China’s tightening financial conditions should spill into weaker Chinese activity/commodity prices for several more months yet and our Canada surprise index still has plenty of territory to cover on the downside before it hits levels consistent with all the bad news in the rear view mirror.”