The CAD that Could...Can’t Anymore - TDS
Mazen Issa, Senior FX Strategist at TDS, suggests that not too long ago,
they advocated that USD/CAD upside was beginning to look more attractive
and cautioned, however, that patience would be required amidst a very
complex backdrop in FX.
“This was premised on the view that Canadian growth had accelerated to an unsustainably high run rate. Inevitably, we thought, we would reach a point of peak optimism. That point may have happened today.
In a move that has lacked a clear catalyst the USD has enjoyed a broad rally thus far this week. The CAD has suffered disproportionately, extending its decline following the release of poor Canadian trade figures. While we are reticent to put too much stock in one month of data, revisions and underlying details were very disappointing.
Though caution is warranted on chasing the move higher, technically, USD/CAD topside looks more appealing now. A close above 1.2850 should be bullish for the pair and would strengthen our conviction for a more protracted move above 1.30.
That should be significant enough to shake out some of the bullish positioning in the CAD. We note, however, that with the Fed sensitive to USD strength, topside potential is limited. For now, the 1.35 region is likely to cap the rally.”