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USD/CAD: technical downside risks but 1.28/1.29 should offer support – TDS

FXStreet (Córdoba) - According to the Rates, FX and Commodities Research Team at TD Securities, the Canadian economy could rebound in the third quarter but they continue to key a bearish view on the loonie.

Key Quotes:

“Recent economic data confirms our expectation for a solid bounce i n Q3 following the technical recession i n 2015H1. Led by net exports and a rebound in domestic demand, we are forecasting a 2.5% annualized increase. Renewed global headwinds are expected to provide a greater challenge to growth through the end of the year and into early 2016. The Bank of Canada is forecast to remain on the sidelines as these developments unfold.”

“We maintain our longstanding CAD bearishness and expect it to underperform both against the USD and on certain key crosses. In addition to expecting USDCAD to move higher in coming weeks on a break of 1.3355, we think AUDCAD is likely to continue its upward march.”

“We remain medium-term bears on the CAD as persistent weakness is required to offset Canada's competitive disadvantage. While USDCAD is at fresh highs, rate spreads point to some tactical downside risk but 1.28/1.29 (post-July BoC levels) should act as a durable floor.”

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