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USDCAD: Aiming for fresh higher target - TDS

FXStreet (Delhi) – Research Team at TDS, notes that the USDCAD has held in near the 1.3300 figure following Friday’s payrolls bonanza.

Key Quotes

“Note however, that the Canadian jobs report (+44k) were artificially inflated by a temporary hiring in the public sector (+32k) due to the Federal election in October. We have long noted that the next up-leg in USDCAD will require a policy catalyst; the combination of a strong payrolls report and hawkish comments from one of the most dovish (and voting) members (Evans) of the FOMC on Friday (which is now consistent with the rhetoric of the FOMC core) have changed the balance of risks for a Fed hike to December (instead of early 2016).”

“As such, we have raised our year-end target for USDCAD to 1.37 by year-end and peaking at 1.40 early next year (see link in the FX setup above). The next major level will be the multi-year high of 1.3457 observed in late September broadly represents the 61.8% Fibo level since the 2002 peak, and if breached, there is no clear resistance point until the 1.37/40 area.”

“Note however, that some technicals (RSI and stochastics) suggest that the sustainability of USDCAD at these levels is circumspect and we suspect that investors will look to take some profit following Friday’s surge. But this will only be temporary in nature especially if Rosengren (dovish, voter next year) confirms that December is a live meeting (which is now priced near 70%). If so, this should renew the bid in USDCAD. Until the Rosengren headlines hit (12:00ET), USDCAD may drift lower however; we spot support around 1.3220/30 so we would view a dip to those levels as another opportunity to add to strategic longs.”

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