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USDCAD: Current rally looking a little overextended

FXStreet (Delhi) – Ned Rumpeltin, European Head of Currency Strategy at TD Securities, note that the rally in USDCAD ran out of steam overnight as the post-Yellen speech move above 1.34 was rejected.

Key Quotes

“With oil prices stable and rate spreads on more of a Canada-positive footing, we see this latest leg higher in spot as reflecting more of a general enthusiasm for USD strength rather than anything specific to do with CAD.”

“Indeed, with the USD now stronger against the whole G10 complex since last week’s FOMC, the relative performance of the CAD has it lagging currencies such as the NOK, SEK, and AUD which have clearly lagged.”

“We would not be surprised to see a pullback to the 1.32/1.3250 area over the next several days to close some of USDCAD’s valuation gap to underlying fundamental drivers. Even here, this would leave spot well above our current fair value estimate of 1.2932.”

“With little on the Canadian data or event calendar until next Wednesday’s GDP report for July, CAD is likely to remain subject to the whims of flows and overall USD direction.”

“Technically, the 26 August high of 1.3354 remains the key pivot for today. A weekly close above this mark reinforces the bull case, while a move below may set the stage for a bit more of a corrective tone ahead.”

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