28 Apr 2014
USD/CAD; fully exclosed - TDS
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities said that the CAD is starting to feel like it will never move again after trading in a range of barely more than 50 ticks last week.
Key Quotes:
"Usually the point in the cycle just before we do get some renewed volatility in the currency, it always seems. To be fair, market holidays and the lack of domestic data have not helped the CAD."
"And there have also been some significant option expiries in the market to further dampen directional interest. But look around and there are some incentives to trade—it’s just that the market is choosing to ignore them."
"On the positive side of things for the CAD, commodities have had a constructive couple of weeks, with the CRB rising to its highest level since 2012 on Friday. This is usually a plus for the CAD broadly—our correlation matrix on the first page shows the CAD’s correlation with commodities has firmed even if the linkage has been less than useful as a guide for the CAD recently."
"Ukraine risks are behind some of this, with gains in nickel, wheat, energy and gold all linked back to the simmering geo-political tensions in the region. The offset here may be that rising tensions are not positive for equity risk sentiment and the CAD’s negative correlation with the VIX index has also strengthened."
"Meanwhile, the grinding rise in US yields, which we expect to be reinforced broadly by this week’s data releases—especially if the NFP payroll release Friday comes in relatively strong—should be broadly supportive for the USD and help rekindle the upward track in USD/CAD. We remain bullish USD/CAD and continue to feel that wider spreads and the Fed’s steady reduction in accommodation will contrast with the BoC’s dovish-leaning position to push funds into the mid/upper teens in the months ahead."
"On the domestic front, Canadian data releases have a little less profile than US data this week, mainly because Canadian job numbers are released a week Friday (not alongside the US data this week). Canadian data include February GDP (market and TD +0.2%) and IPPI on Wednesday and the RBC manufacturing PMI on Thursday. Governor Poloz is testifying Tuesday and Wednesday in Ottawa before the finance and banking committees."
"On the charts, we think the 1.1000/20 zone should continue to provide support for the USD but the range-bound nature of the market in the past couple of weeks has robbed funds of some of the directional momentum that had been building up. We still rather think though that gains through 1.1050/70 (40-day MA at 1.1051, retracement resistance at 1.1069) will open up the topside more for funds."
Key Quotes:
"Usually the point in the cycle just before we do get some renewed volatility in the currency, it always seems. To be fair, market holidays and the lack of domestic data have not helped the CAD."
"And there have also been some significant option expiries in the market to further dampen directional interest. But look around and there are some incentives to trade—it’s just that the market is choosing to ignore them."
"On the positive side of things for the CAD, commodities have had a constructive couple of weeks, with the CRB rising to its highest level since 2012 on Friday. This is usually a plus for the CAD broadly—our correlation matrix on the first page shows the CAD’s correlation with commodities has firmed even if the linkage has been less than useful as a guide for the CAD recently."
"Ukraine risks are behind some of this, with gains in nickel, wheat, energy and gold all linked back to the simmering geo-political tensions in the region. The offset here may be that rising tensions are not positive for equity risk sentiment and the CAD’s negative correlation with the VIX index has also strengthened."
"Meanwhile, the grinding rise in US yields, which we expect to be reinforced broadly by this week’s data releases—especially if the NFP payroll release Friday comes in relatively strong—should be broadly supportive for the USD and help rekindle the upward track in USD/CAD. We remain bullish USD/CAD and continue to feel that wider spreads and the Fed’s steady reduction in accommodation will contrast with the BoC’s dovish-leaning position to push funds into the mid/upper teens in the months ahead."
"On the domestic front, Canadian data releases have a little less profile than US data this week, mainly because Canadian job numbers are released a week Friday (not alongside the US data this week). Canadian data include February GDP (market and TD +0.2%) and IPPI on Wednesday and the RBC manufacturing PMI on Thursday. Governor Poloz is testifying Tuesday and Wednesday in Ottawa before the finance and banking committees."
"On the charts, we think the 1.1000/20 zone should continue to provide support for the USD but the range-bound nature of the market in the past couple of weeks has robbed funds of some of the directional momentum that had been building up. We still rather think though that gains through 1.1050/70 (40-day MA at 1.1051, retracement resistance at 1.1069) will open up the topside more for funds."