29 Apr 2015
USD/CAD year-end target at 1.30 – TDS
FXStreet (Barcelona) - FX Strategists at TD Securities, believe that CAD is set to weaken even if Fed rate hike expectations are pushed ahead, further forecasting USD/CAD to end 2015 at 1.30 levels.
Key Quotes
“The USD has now given up all of the gains made in the aftermath of the January move and funds still look heavy in our opinion. The drop to 1.20—effectively, an important technical threshold in the form of the 38.2% retracement of the 1.06/1.28 rally—coincides with a broader slide in the USD and today’s FOMC meeting conclusion.”
“The market that expects, but might still react to, a dovish tilt to the Fed policy statement today. And certainly, an outcome open to a more hawkish interpretation would boost the USD briefly at least."
“We think there is a little more downside to come from this shift lower in funds though and we would note that our recent updates have focused on the risk of a drop to the 1.1925 area—which would compromise retracement support just under 1.19 and imply the risk of an even deeper drop developing. This is well below our daily estimate for FV, which puts USDCAD around 1.2160.”
“While we think the short-term trend lower in USDCAD still has room to play out, we continue to believe in the USDCAD rebound in H2.”
“If Governor Poloz is right and the US economy rebounds strongly from the Q1 lull (and recent history is on his side here),happy days! But the Fed tightens in September (our base case, still), well ahead of the BoC. If there is no rebound to pull Canada up, markets will be looking at the BoC’s double indemnity insurance policy. Either way, the CAD is liable to lose. We continue to target 1.30 for year-end.”
Key Quotes
“The USD has now given up all of the gains made in the aftermath of the January move and funds still look heavy in our opinion. The drop to 1.20—effectively, an important technical threshold in the form of the 38.2% retracement of the 1.06/1.28 rally—coincides with a broader slide in the USD and today’s FOMC meeting conclusion.”
“The market that expects, but might still react to, a dovish tilt to the Fed policy statement today. And certainly, an outcome open to a more hawkish interpretation would boost the USD briefly at least."
“We think there is a little more downside to come from this shift lower in funds though and we would note that our recent updates have focused on the risk of a drop to the 1.1925 area—which would compromise retracement support just under 1.19 and imply the risk of an even deeper drop developing. This is well below our daily estimate for FV, which puts USDCAD around 1.2160.”
“While we think the short-term trend lower in USDCAD still has room to play out, we continue to believe in the USDCAD rebound in H2.”
“If Governor Poloz is right and the US economy rebounds strongly from the Q1 lull (and recent history is on his side here),happy days! But the Fed tightens in September (our base case, still), well ahead of the BoC. If there is no rebound to pull Canada up, markets will be looking at the BoC’s double indemnity insurance policy. Either way, the CAD is liable to lose. We continue to target 1.30 for year-end.”