2 Feb 2015
USD/CAD short-term probability of a move lower – Scotiabank
FXStreet (Barcelona) - Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, shares the trade setup for USD/CAD for the short-term, noting that the pair might make retrace lower towards 1.2390.
Key Quotes
“CAD is strong, benefiting from a rally in oil prices, with WTI spot up to $49 and Brent up to $55, rallies of 15% and 22%, respectively from their January lows.”
“The first month of the year was marked by CAD losses of 9%, the second largest monthly losses in twenty years, with the only larger monthly loss in the midst of the financial crisis. CAD also proved the worst performing currency, suffering larger losses than all the other primary currencies.”
“With oil showing signs of stabilization, the risk of a second BoC interest rate cut in March will decrease.”
“In addition, on a PPP basis CAD is now 6% undervalued. The risk is shifting towards a brief period of retracement, which will have CAD rally temporarily from these lows.”
“USDCAD trade idea—For short‐term traders we see value in being short USDCAD at current levels, 1.2665, looking for a test of 1.2390 with a stop at 1.2820. This is a short‐term trade idea and reflective of a temporary retracement only, somewhat dependent on oil prices. For medium term traders, the risk for USDCAD is still higher”
Key Quotes
“CAD is strong, benefiting from a rally in oil prices, with WTI spot up to $49 and Brent up to $55, rallies of 15% and 22%, respectively from their January lows.”
“The first month of the year was marked by CAD losses of 9%, the second largest monthly losses in twenty years, with the only larger monthly loss in the midst of the financial crisis. CAD also proved the worst performing currency, suffering larger losses than all the other primary currencies.”
“With oil showing signs of stabilization, the risk of a second BoC interest rate cut in March will decrease.”
“In addition, on a PPP basis CAD is now 6% undervalued. The risk is shifting towards a brief period of retracement, which will have CAD rally temporarily from these lows.”
“USDCAD trade idea—For short‐term traders we see value in being short USDCAD at current levels, 1.2665, looking for a test of 1.2390 with a stop at 1.2820. This is a short‐term trade idea and reflective of a temporary retracement only, somewhat dependent on oil prices. For medium term traders, the risk for USDCAD is still higher”