Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, notes that CAD has made fresh lows in tandem with oil prices and increased risk of a second BoC cut, opening doors for a further USD/CAD upmove.
Key Quotes
“CAD is weak having traded to fresh 5.5‐year lows, opening the door to further weakness as WTI oil falls to fresh lows and the central banks of commodity currencies (BoC, RBA, RBNZ) take dovish turns. Today, there is no domestic data, leaving the focus on broader market developments.”
“CAD outlook—CAD has lost 7.4% ytd and is the worst performing primary currency in 2015; in addition since its July 3rd high, CAD has lost 15%. The core drivers have been: 1) the collapse in oil prices; 2) a deterioration in the Canadian economic landscape; 3) diverging monetary policies; 4) a broadly stronger USD; and 5) building CAD negative sentiment;. These are the same drivers that will provide the foundation for its path from here.”
“USDCAD short‐term technicals: bullish—all signals warn of further USDCAD upside (CAD weakness). The most relevant resistance level from here is 1.2600, followed by the January 2004 lows of 1.2683.”
“Support levels are more awkward, initially at 1.2500 followed by 1.2400.”
“The RSI at 76, is flirting with overbought levels, however the upward trend will remain in place even with a retracement down to 1.1517 (just below the 50% Fibo of the July to January rally at 1.1592).”
Key Quotes
“CAD is weak having traded to fresh 5.5‐year lows, opening the door to further weakness as WTI oil falls to fresh lows and the central banks of commodity currencies (BoC, RBA, RBNZ) take dovish turns. Today, there is no domestic data, leaving the focus on broader market developments.”
“CAD outlook—CAD has lost 7.4% ytd and is the worst performing primary currency in 2015; in addition since its July 3rd high, CAD has lost 15%. The core drivers have been: 1) the collapse in oil prices; 2) a deterioration in the Canadian economic landscape; 3) diverging monetary policies; 4) a broadly stronger USD; and 5) building CAD negative sentiment;. These are the same drivers that will provide the foundation for its path from here.”
“USDCAD short‐term technicals: bullish—all signals warn of further USDCAD upside (CAD weakness). The most relevant resistance level from here is 1.2600, followed by the January 2004 lows of 1.2683.”
“Support levels are more awkward, initially at 1.2500 followed by 1.2400.”
“The RSI at 76, is flirting with overbought levels, however the upward trend will remain in place even with a retracement down to 1.1517 (just below the 50% Fibo of the July to January rally at 1.1592).”
