26 Jun 2014
USD/CAD: too early to call a bottom - Scotiabank
FXStreet (Córdoba) - Camilla Sutton, analyst at Scotiabank commented that it is too early to call a bottom in USD/CAD as it flirts with a break of the 1.0700 support area.
Key Quotes
“USD/CAD is flirting with a break of the important 1.0708 50% Fibo retracement of the June 2013 to March 2014 rally. A close below here would be important for short term direction”.
“It is too early to call a bottom in USD/CAD and accordingly for near‐term traders would trade with the trend; however further strength from here will be a challenge to sustain for several reasons, including: 1) the likely BoC reaction; 2) a sooner U.S. GDP outlook is also disappointing for the Canadian GDP outlook; 3) oil prices driven above $106 by supply (as oppose to demand) is likely to dampen the U.S. economy, dampening some of the positive impact of high oil prices on Canada; and 4) a lack of bullish CAD sentiment”.
“USD/CAD short‐term technicals: bearish—all studies warn of further downside risk and spot is flirting with a break of 1.0708 ‐ the 50% Fibo retracement of the June 2013 to March 2014 rally. Accordingly downside momentum is strong and the RSI at 27 has not yet reached oversold levels”.
“For short‐term risk traders, we’d be biased to be short USD/CAD; however based on the fundamentals we’d expect USD/CAD to prove more range bound in the medium term”.
Key Quotes
“USD/CAD is flirting with a break of the important 1.0708 50% Fibo retracement of the June 2013 to March 2014 rally. A close below here would be important for short term direction”.
“It is too early to call a bottom in USD/CAD and accordingly for near‐term traders would trade with the trend; however further strength from here will be a challenge to sustain for several reasons, including: 1) the likely BoC reaction; 2) a sooner U.S. GDP outlook is also disappointing for the Canadian GDP outlook; 3) oil prices driven above $106 by supply (as oppose to demand) is likely to dampen the U.S. economy, dampening some of the positive impact of high oil prices on Canada; and 4) a lack of bullish CAD sentiment”.
“USD/CAD short‐term technicals: bearish—all studies warn of further downside risk and spot is flirting with a break of 1.0708 ‐ the 50% Fibo retracement of the June 2013 to March 2014 rally. Accordingly downside momentum is strong and the RSI at 27 has not yet reached oversold levels”.
“For short‐term risk traders, we’d be biased to be short USD/CAD; however based on the fundamentals we’d expect USD/CAD to prove more range bound in the medium term”.