27 May 2014
CAD insight; a soft undertone - TD Securities
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities notes that USD/CAD retains a soft undertone as activity starts to pick up again after Monday's slow grind.
Key Quotes:
"USD/CAD retains a soft undertone as activity starts to pick up again after Monday's slow grind. There's not much to add in terms of commentary today and our core views remain the same – namely that, despite the recent slide in funds, we continue to believe that the broader trend in USD/CAD remains higher (based on our assumptions of US economic recovery, Fed tapering and an on hold – for now BoC)."
"However, the short-term price action is inarguably weak for funds and the loss of support in the mid/upper 1.08 area suggests that the bull break out seen last week through the low 1.09 zone has come to nothing. Another look at support in the low 1.08 area beckons, especially of today’s US data run disappoints. We suspect CAD gains should start to slow in the 1.0800/10 zone with the BoC policy meeting just around the corner, however."
"Seasonal factors should remain a background concern for the CAD, at least we think. Risk assets have tended tend to under-perform in the May-June period (in the past 10 years, May-June is the worst 2-month run of the year for the S&P 500, with the bulk of the negative performance seen on average in these two months recorded in June)."
"The CAD is not especially strongly-correlated with equities at the moment, our correlation studies highlight. But, considering that low volatility measures across asset classes might suggest that investors are perhaps a little complacent about the risks facing the markets, a drop in stocks could quickly spill-over into other assets - and FX especially. We would expect the CAD to under-perform somewhat at least, alongside the likes of the AUD and NZD, in the event of a spike in market volatility."
Key Quotes:
"USD/CAD retains a soft undertone as activity starts to pick up again after Monday's slow grind. There's not much to add in terms of commentary today and our core views remain the same – namely that, despite the recent slide in funds, we continue to believe that the broader trend in USD/CAD remains higher (based on our assumptions of US economic recovery, Fed tapering and an on hold – for now BoC)."
"However, the short-term price action is inarguably weak for funds and the loss of support in the mid/upper 1.08 area suggests that the bull break out seen last week through the low 1.09 zone has come to nothing. Another look at support in the low 1.08 area beckons, especially of today’s US data run disappoints. We suspect CAD gains should start to slow in the 1.0800/10 zone with the BoC policy meeting just around the corner, however."
"Seasonal factors should remain a background concern for the CAD, at least we think. Risk assets have tended tend to under-perform in the May-June period (in the past 10 years, May-June is the worst 2-month run of the year for the S&P 500, with the bulk of the negative performance seen on average in these two months recorded in June)."
"The CAD is not especially strongly-correlated with equities at the moment, our correlation studies highlight. But, considering that low volatility measures across asset classes might suggest that investors are perhaps a little complacent about the risks facing the markets, a drop in stocks could quickly spill-over into other assets - and FX especially. We would expect the CAD to under-perform somewhat at least, alongside the likes of the AUD and NZD, in the event of a spike in market volatility."