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Softer commodities may weigh on CAD - TD Securities

FXStreet (Łódź) - The TD Securities team of economists believe that the decline in commodity prices could mean significant headwinds for the CAD in the nearest future.

Key quotes

"The CAD’s correlation with commodities has been weak in recent months—it was negative at the start or the year, based on a rolling 3-month study of daily returns."

"But the correlation has been strengthening quite sharply in the more recent past but, at +40%, it remains below levels that can be deemed statistically significant."

"Still, the trend in tighter correlations is evident and, soon perhaps, ongoing headwinds for commodity prices may translate into more significant headwinds for the CAD."

"Having found firm support late last week around the 200-day MA, USDCAD really needs to make a little clearer headway through the low 1.09 area if it is to stabilize—and improve further– from a technical point of view."

"The early August roll-over in spot is still a technical deadweight on the USD outlook at the moment and it is crucial that USDCAD avoids a further fall from here in the short run to sustain the impression that Friday set an important technical low."

"We look for support at 1.0890/95 today to provide a base for funds to retest 1.0950 in the days ahead."

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