CAD: Bearish cocktail for the currency - Westpac

Richard Franulovich, Research Analyst at Westpac, explains that CAD has few if any redeeming features at the moment as mortgage lender woes, disputes of softwood lumber and dairy exports and poor price action in crude oil all conspire to make for a bearish cocktail for the currency.

Key Quotes

“Home Capital Group’s troubles have little to do with rising mortgage stress (delinquencies are less than 0.3% of their book). Instead the main catalyst has been an “enthusiastic” regulator raising questions about pockets of poor loan documentation several years ago. That said, confidence has been shaken and there are plenty of concerns swirling Canada’s mortgage/housing sector vulnerabilities.”

“Our Canada surprise index hit 18 year highs recently. All the “good news” on the data front is now behind us. Dips into 1.36 should be bought for a run at 1.40.”