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USDCAD: Slowly and steadily nudging higher - TDS

FXStreet (Delhi) – Research Team at TDS, note that recent price action has been rather constructive for USDCAD over the past several trading sessions, which was marked by a new intra-day high of 1.3431 in today’s overnight session.

Key Quotes

“There is no major catalyst for gradual move higher but some of this may be related to residual EM flows (recall last week’s volatility), month-end rebalancing that may be contributing to USD strength and a modest rally in oil prices.”

“Still, the wedge between spot and our daily FV estimate (1.3110) remains wide and will likely persist. The major contributor to the deviation is spreads which in of itself suggest USDCAD should be trading at least 4-big figures lower. We think a washout towards the 1.3150/1.3200 will be necessary to resume a more sustainable uptrend that we expect over the next several months.”

“But for today, we do not see much scope for major price action ahead of tomorrow’s monthly industry GDP report for July where we are in line with the market in forecasting a 0.2% m/m increase. As such, we would advise trading the recent range; barring a major exogenous shock, 1.3360 looks like the first initial support level followed by 1.3300/20. We think the upside will be capped but look for resistance around the 1.3460/80 area.”

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