17 Jun 2014
USD/CAD gains extend near-term - TD Securities
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities notes the CAD’s soft undertone vs USD.
Key Quotes:
"USD/CAD retains a soft undertone; what had started out as a relatively positive-looking session for funds yesterday reversed course by midday, leaving the USD trading back down to retest noted support in the 1.0830/40 area. The positive news is that support held again and we remain upbeat on the outlook for the USD though and continue to feel that the rate environment is supportive of a higher USD currently."
"The USD has seen a significant yield gap open up over the CAD in the belly of the curve where the 5-year spread has moved above 10bps; the spread was as wide as –50bps or in September last year. Spreads are not a particularly strong driver of the exchange rate at the moment, our correlation matrix highlights, but we continue to view the yield gap in this sector of the curve as an important influence for spot. Using spreads and Canadian terms of trade as inputs into our basic CAD fair value regression model, we think USD/CAD should be trading closer to 1.12 currently."
"On the day, we look for firms support for the USD on dips to the low 1.08 area but we will need to see spot move above 1.0880/85—through yesterday’s high—to get any sort of traction. USD/CAD gains extend near-term."
Key Quotes:
"USD/CAD retains a soft undertone; what had started out as a relatively positive-looking session for funds yesterday reversed course by midday, leaving the USD trading back down to retest noted support in the 1.0830/40 area. The positive news is that support held again and we remain upbeat on the outlook for the USD though and continue to feel that the rate environment is supportive of a higher USD currently."
"The USD has seen a significant yield gap open up over the CAD in the belly of the curve where the 5-year spread has moved above 10bps; the spread was as wide as –50bps or in September last year. Spreads are not a particularly strong driver of the exchange rate at the moment, our correlation matrix highlights, but we continue to view the yield gap in this sector of the curve as an important influence for spot. Using spreads and Canadian terms of trade as inputs into our basic CAD fair value regression model, we think USD/CAD should be trading closer to 1.12 currently."
"On the day, we look for firms support for the USD on dips to the low 1.08 area but we will need to see spot move above 1.0880/85—through yesterday’s high—to get any sort of traction. USD/CAD gains extend near-term."