20 Jan 2014
Flash: CAD going to be a buy? - TD Securities
FXstreet.com (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities looked into the USD/CAD with BoC coming up later on in the week.
Key Quotes:
"USDCAD remained well-supported Friday, reversing nicely from the low 1.09 area as the USD picked up broadly. USD gains are still encountering good supply on the approach to the 1.10 area but there is no significant backing off in the trend up in funds at the moment."
"There has been a fair amount of speculation building in the market that the BoC meeting this week will see Governor Poloz shift the policy bias a little further towards easing from the current neutral stance. We rather think there is no rush here and the no change in rates and no change in the basic, neutral position is the more likely outcome, however."
"Policy makers will want to drip feed the changing bias into the market in order to avoid a pre-emptive rebound in the CAD—there is only so far that policy can shift, after all. And policy makers would probably prefer a little more data to support a shift, if it does come."
"There is no rush—the CAD is already providing a fair degree of stimulus to the economy, as we have pointed out before but that may not do that much for inflation as the pass through from a weaker exchange rate has tended to decline in a low inflation environment the BoC’s own research has shown."
"No change rates and a dovish, if neutral from a policy bias perspective, message may disappoint the CAD bears and might give the CAD a bit of a boost in the short-term. But we don’t think it spells a sustained rally. Note that 5-year Canada-US spreads continue to narrow against the CAD (spreads rest on a fresh 4 1/2 year low today, just above 7bps) which supports higher USDCAD levels still, we feel."
"If there is a dip after the BoC we think it’s a buying opportunity. Near-term, look for consolidation; we see support at 1.0850/70 as firm, but reachable if USDCAD drops below 1.0625/35 in the next 48 hours. Resistance is 1.0980."
Key Quotes:
"USDCAD remained well-supported Friday, reversing nicely from the low 1.09 area as the USD picked up broadly. USD gains are still encountering good supply on the approach to the 1.10 area but there is no significant backing off in the trend up in funds at the moment."
"There has been a fair amount of speculation building in the market that the BoC meeting this week will see Governor Poloz shift the policy bias a little further towards easing from the current neutral stance. We rather think there is no rush here and the no change in rates and no change in the basic, neutral position is the more likely outcome, however."
"Policy makers will want to drip feed the changing bias into the market in order to avoid a pre-emptive rebound in the CAD—there is only so far that policy can shift, after all. And policy makers would probably prefer a little more data to support a shift, if it does come."
"There is no rush—the CAD is already providing a fair degree of stimulus to the economy, as we have pointed out before but that may not do that much for inflation as the pass through from a weaker exchange rate has tended to decline in a low inflation environment the BoC’s own research has shown."
"No change rates and a dovish, if neutral from a policy bias perspective, message may disappoint the CAD bears and might give the CAD a bit of a boost in the short-term. But we don’t think it spells a sustained rally. Note that 5-year Canada-US spreads continue to narrow against the CAD (spreads rest on a fresh 4 1/2 year low today, just above 7bps) which supports higher USDCAD levels still, we feel."
"If there is a dip after the BoC we think it’s a buying opportunity. Near-term, look for consolidation; we see support at 1.0850/70 as firm, but reachable if USDCAD drops below 1.0625/35 in the next 48 hours. Resistance is 1.0980."