21 Jul 2014
USD/CAD overvalued? -TD Securities
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities tells us that they remain constructive on the outlook for USD/CAD but the market will need a clear catalyst to sustain the July rebound and push on through the 1.08 area.
Key Quotes:
The USD’s reversal from the low 1.06 area earlier this month remains technically compelling and we still rather think that the Canadian economy is facing some headwinds (weak jobs growth, no rotation away from domestic demand as the main driver of growth) which will make it difficult for the BoC to even contemplate rate increases in the months ahead, particularly as the central bank has made it clear that it will ignore a temporary rise in inflation."
"At the same time, the US economy is slowly recovering and the Fed is likely to wind up its QE programme before the end of the year. Spreads in the belly of the curve, which proved such a pull on USD/CAD in H1, have continued to move in the USD’s favour in the past few weeks and suggest— to us, at least—that the USD remains somewhat undervalued."
"For today, we see minor resistance developing in the mid 1.07 area as our session gets underway, which may mean another look at support in the low 1.07 area but we think scope for CAD gains is limited at this point. We look for firm support on minor weakness to the 1.0710/15 area.".
“USD/CAD trading above 1.0750 should see 1.0800/15 retested."
Key Quotes:
The USD’s reversal from the low 1.06 area earlier this month remains technically compelling and we still rather think that the Canadian economy is facing some headwinds (weak jobs growth, no rotation away from domestic demand as the main driver of growth) which will make it difficult for the BoC to even contemplate rate increases in the months ahead, particularly as the central bank has made it clear that it will ignore a temporary rise in inflation."
"At the same time, the US economy is slowly recovering and the Fed is likely to wind up its QE programme before the end of the year. Spreads in the belly of the curve, which proved such a pull on USD/CAD in H1, have continued to move in the USD’s favour in the past few weeks and suggest— to us, at least—that the USD remains somewhat undervalued."
"For today, we see minor resistance developing in the mid 1.07 area as our session gets underway, which may mean another look at support in the low 1.07 area but we think scope for CAD gains is limited at this point. We look for firm support on minor weakness to the 1.0710/15 area.".
“USD/CAD trading above 1.0750 should see 1.0800/15 retested."