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USDCAD: Range-bound trading for now - TDS

FXStreet (Delhi) – Research Team at TD Securities, note that the Friday’s close above 1.3150 was technically bullish for USDCAD, which also represents the 50% Fibo from the multi-year September 29th high.

Key Quotes

“It is a light week for Canada with August industry level real GDP (Friday) the only major economic release. Focus instead will be elsewhere with a slew of central bank meetings and the results of China’s fifth plenum.”

“The FOMC meeting (Wednesday) is expected to have a dovish overtone with the economy losing momentum; our recent tracking estimate suggests somewhere in the vicinity of 1.5% q/q annualized in Q3 (the Atlanta Fed’s nowcasting model suggests an estimate closer to 1.0%). In addition to slowing domestic growth, the international outlook remains murky so we expect the Fed to remain on hold. Even if the Fed kept the narrative of “a 2015 hike is still alive”, we think the market will likely fade it as the central bank’s credibility has taken a hit.”

“We remain medium-term bulls but is likely to resume in the new year when we expect a policy catalyst – likely from the Fed – to push USDCAD higher. We think the Bank is sidelined for the next few quarters owing to lower growth forecasts and the fact that Poloz noted that only half of the stimulus provided has been observed.”

“USDCAD has formed a nice base around the 1.28/1.29 area, but with the Bank noting that the economy’s adjustment will take years, we like buying USDCAD on dips towards the 1.3050/80 level (our daily fair value continues to creep higher and now stands at ~1.3000).”

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