5 May 2014
USD/CAD broadly bullish – TDS
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities explained the events around USD/CAD and remains broadly bullish for funds.
Key Quotes
"The CAD has been subdued in quiet trade so far this wee. Volatility may pick up in the days ahead, however as the Canadian economic release schedule picks up a little more this week—trade data are released Tuesday (we look for a weak-ish report and note that the contents of last week’s US trade data did not augur too positively for Canada), housing data follow Wednesday and Thursday and the employment report is out on Friday (market consensus is for a 15k gain after the 42.9k rise in March)."
"We remain bullish on the broader outlook for USD/CAD—better US data should, eventually, push US yields more obviously higher and pull the USD higher alongside. The better US non-farm payroll numbers last week suggest that the US economy is gathering some momentum after the recent, weather-related softness."
"As Governor Poloz has pointed out in his recent remarks however, there are some sectors of the Canadian economy that are not picking up as much as we might expect due to structural challenges and lost competitiveness. We continue to believe that a slightly softer CAD will have to be part of the solution to that particular challenge."
"From a short-term point of view, we would also highlight that early May tends to be a little more seasonally supportive for USD/CAD—the early part of the month has been the staging point for short, sharp rallies in USD/CAD in the past few years. We note an average 6.6% rally in funds from the low point of the market in late April or early May over the following 4-8 weeks since 2010 and note a seasonal bias towards USD/CAD strength in the period going back a number of years beyond that as well. Over the past 10 years, May has also seen the biggest jump in short-term implied volatility of any month in the year."
"As such, and with a firm base in place at 1.0860 from a technical point of view still, we rather think that risk/reward considerations favour USD/CAD longs from current—or very near—levels. Technically, short-term patterns looks positive—despite the USD’s failure to thrive following the US NFP release last week."
"Gains through 1.1000/10 should be a short-term positive for USD/CAD. We spot firm support at 1.0940/50 now."
Key Quotes
"The CAD has been subdued in quiet trade so far this wee. Volatility may pick up in the days ahead, however as the Canadian economic release schedule picks up a little more this week—trade data are released Tuesday (we look for a weak-ish report and note that the contents of last week’s US trade data did not augur too positively for Canada), housing data follow Wednesday and Thursday and the employment report is out on Friday (market consensus is for a 15k gain after the 42.9k rise in March)."
"We remain bullish on the broader outlook for USD/CAD—better US data should, eventually, push US yields more obviously higher and pull the USD higher alongside. The better US non-farm payroll numbers last week suggest that the US economy is gathering some momentum after the recent, weather-related softness."
"As Governor Poloz has pointed out in his recent remarks however, there are some sectors of the Canadian economy that are not picking up as much as we might expect due to structural challenges and lost competitiveness. We continue to believe that a slightly softer CAD will have to be part of the solution to that particular challenge."
"From a short-term point of view, we would also highlight that early May tends to be a little more seasonally supportive for USD/CAD—the early part of the month has been the staging point for short, sharp rallies in USD/CAD in the past few years. We note an average 6.6% rally in funds from the low point of the market in late April or early May over the following 4-8 weeks since 2010 and note a seasonal bias towards USD/CAD strength in the period going back a number of years beyond that as well. Over the past 10 years, May has also seen the biggest jump in short-term implied volatility of any month in the year."
"As such, and with a firm base in place at 1.0860 from a technical point of view still, we rather think that risk/reward considerations favour USD/CAD longs from current—or very near—levels. Technically, short-term patterns looks positive—despite the USD’s failure to thrive following the US NFP release last week."
"Gains through 1.1000/10 should be a short-term positive for USD/CAD. We spot firm support at 1.0940/50 now."