15 Jul 2014
USD/CAD manic conditions with BoC approaching - TD Securities
FXStreet (Guatemala) - Despite the rally we have seen in funds on the back of Yellen today, it is still worth noting that Shaun Osbourne, Chief FX Strategist at TD Securities explained that Wednesday’s BoC policy announcement looms quite large over the market, there is even less incentive to push the CAD around independently of the big dollar's broader lead today.
Key Quotes:
“Note that the crude is one of the stronger drivers of the CAD potentially, according to our correlation matrix; weakness in WTI below USD100 may add incremental pressure on the CAD."
"We expect no change in BoC policy but there is clearly some anticipation building up in the market that Governor Poloz can tilt the policy outlook a little more dovishly as the recent pick-up in inflation is likely to abate and last week’s Canadian employment data clearly highlighted the fact that the Canadian jobs market is under-performing."
"We think the extended drop in funds since March essentially reflects a positioning overhang that had to be corrected after the CAD sell-off that developed through the early part of the year failed to extend. IMM data suggest that the CAD short-covering among speculative accounts is now largely complete."
"Market positioning is more neutral now and we do not think there are strong incentives to build CAD long positions aggressively considering the domestic backdrop. The bounce in USD/CAD since Friday’s weak jobs report may signal the resumption of a broadly softer CAD trend."
"Technically, there are strong signals in USD/CAD (and supporting evidence on some of the major CAD crosses) that the stronger CAD trend that has prevailed in the past few months is at a turning point finally. USD/CAD has turned at an important technical juncture—major trend and retracement support in the low/mid 1.06 area."
"Price signals on the short and medium-term charts are bullish. We expect firm support on modest dips —high 1.06s— from here and for USD/CAD to push back to the low 1.08 area soon. Gains through here (40-day MA at 1.0825 currently) would be more obviously positive for the USD/CAD outlook."
Key Quotes:
“Note that the crude is one of the stronger drivers of the CAD potentially, according to our correlation matrix; weakness in WTI below USD100 may add incremental pressure on the CAD."
"We expect no change in BoC policy but there is clearly some anticipation building up in the market that Governor Poloz can tilt the policy outlook a little more dovishly as the recent pick-up in inflation is likely to abate and last week’s Canadian employment data clearly highlighted the fact that the Canadian jobs market is under-performing."
"We think the extended drop in funds since March essentially reflects a positioning overhang that had to be corrected after the CAD sell-off that developed through the early part of the year failed to extend. IMM data suggest that the CAD short-covering among speculative accounts is now largely complete."
"Market positioning is more neutral now and we do not think there are strong incentives to build CAD long positions aggressively considering the domestic backdrop. The bounce in USD/CAD since Friday’s weak jobs report may signal the resumption of a broadly softer CAD trend."
"Technically, there are strong signals in USD/CAD (and supporting evidence on some of the major CAD crosses) that the stronger CAD trend that has prevailed in the past few months is at a turning point finally. USD/CAD has turned at an important technical juncture—major trend and retracement support in the low/mid 1.06 area."
"Price signals on the short and medium-term charts are bullish. We expect firm support on modest dips —high 1.06s— from here and for USD/CAD to push back to the low 1.08 area soon. Gains through here (40-day MA at 1.0825 currently) would be more obviously positive for the USD/CAD outlook."