30 Oct 2013
USD/CAD downwards as US data leaves loonie a tad stronger
FXstreet.com (Athens) – The USD/CAD is trading softly downwards after the dismal US data said the ‘final goodbye’ to the notorious tapering, opening the way to the loonie to move to the upper level.
The USD/CAD is trading negatively the last hour – after 5 consecutive ‘green’ days – as the loonie is slightly strengthening across the board after the weak US data. While markets have already ‘priced in’ a dovish outcome (no-tapering) pertaining to the FOMC Statement, we should point out that the final outcome is very significant regarding to the Canadian dollar, because the latter one is heavily positively correlated with US markets, while also it as well immensely correlated with the difference in the two-year US and Canadian bond yields. Apart from the strong correlations between the loonie and the US economy, we should also bear in mind that tomorrow we will have very interesting data for Canada, i.e. Canadian GDP and labor data as well for the month of August.
Technical Aspects on the USD/CAD
Greg Moore on behalf of TD Securities suggests that “Yesterday’s testimony by the BoC’s Poloz and Macklem didn’t add any new insights on the Bank’s outlook, but the reiteration of last week’s shift to neutral guidance was enough to see USD/CAD reach new highs for the month. A more dovish BoC and a generally stronger USD should keep the pair’s bullish trend intact through the end of the end of the year. For today, the market has been consolidative so far and USD/CAD has pulled back slightly in line with that tone. The FOMC meeting should determine where we go from here, but it would take a significantly more dovish message from the Fed to damage USD/CAD’s bullish momentum. On the charts, look for solid support in the 1.0380/1.0400 area, and key resistance near 1.0515/20.
The USD/CAD is trading negatively the last hour – after 5 consecutive ‘green’ days – as the loonie is slightly strengthening across the board after the weak US data. While markets have already ‘priced in’ a dovish outcome (no-tapering) pertaining to the FOMC Statement, we should point out that the final outcome is very significant regarding to the Canadian dollar, because the latter one is heavily positively correlated with US markets, while also it as well immensely correlated with the difference in the two-year US and Canadian bond yields. Apart from the strong correlations between the loonie and the US economy, we should also bear in mind that tomorrow we will have very interesting data for Canada, i.e. Canadian GDP and labor data as well for the month of August.
Technical Aspects on the USD/CAD
Greg Moore on behalf of TD Securities suggests that “Yesterday’s testimony by the BoC’s Poloz and Macklem didn’t add any new insights on the Bank’s outlook, but the reiteration of last week’s shift to neutral guidance was enough to see USD/CAD reach new highs for the month. A more dovish BoC and a generally stronger USD should keep the pair’s bullish trend intact through the end of the end of the year. For today, the market has been consolidative so far and USD/CAD has pulled back slightly in line with that tone. The FOMC meeting should determine where we go from here, but it would take a significantly more dovish message from the Fed to damage USD/CAD’s bullish momentum. On the charts, look for solid support in the 1.0380/1.0400 area, and key resistance near 1.0515/20.