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31 Aug 2015
USD/CAD: The calm before another storm - TDS
FXStreet (Mumbai) - Analysts at T D Securities argue that there is little going on the US and Canadian economic calendars to drive USD/CAD today, although highlighting that last week the spot looked overvalued relative to the fair value model (which currently stands at 1.2990).
Key Quotes:
“On Friday, we suggested a tactical consolidation for funds given the mis-valuation but that window/opportunity is closing rapidly with major event risk in the coming days beginning with tomorrow's Q2 GDP report.”
“USDCAD has lagged the movements in crude oil prices which still holds a solid correlative relationship with funds according to our monthly study.”
“But, we think the disconnect can also be attributed by the observation that at such low levels of crude prices, the elasticity/beta is reduced.”
“Nonetheless, we would be cautious today, with little domestic data drivers to influence USDCAD, but we would also expect the very broad 1.2900/1.3350 range to hold.”
“Thus far, playing USDCAD from the long side has worked with 1.3150 acting as decent intra-day support over the past week or so.”
“A break below this level should not be viewed as a fundamental shift on the overall bearish view on the CAD.”
“Instead, we would view a major consolidative move in USDCAD as healthy and a necessary condition to trigger the next phase higher in the cross over the medium-term.”
“Indeed, leveraged accounts have increased bearish bets on the CAD (according to CFTC data) and looks a bit extended relative to the historical average.”
Key Quotes:
“On Friday, we suggested a tactical consolidation for funds given the mis-valuation but that window/opportunity is closing rapidly with major event risk in the coming days beginning with tomorrow's Q2 GDP report.”
“USDCAD has lagged the movements in crude oil prices which still holds a solid correlative relationship with funds according to our monthly study.”
“But, we think the disconnect can also be attributed by the observation that at such low levels of crude prices, the elasticity/beta is reduced.”
“Nonetheless, we would be cautious today, with little domestic data drivers to influence USDCAD, but we would also expect the very broad 1.2900/1.3350 range to hold.”
“Thus far, playing USDCAD from the long side has worked with 1.3150 acting as decent intra-day support over the past week or so.”
“A break below this level should not be viewed as a fundamental shift on the overall bearish view on the CAD.”
“Instead, we would view a major consolidative move in USDCAD as healthy and a necessary condition to trigger the next phase higher in the cross over the medium-term.”
“Indeed, leveraged accounts have increased bearish bets on the CAD (according to CFTC data) and looks a bit extended relative to the historical average.”