23 Jan 2014
Flash: USD/CAD analysed - TD Securities
FXstreet.com (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities said earlier and noted that the USD/CAD took off like a scolded cat in the aftermath of the BoC policy announcement yesterday and opens about 2 big figures higher this morning relative to yesterday’s open.
Key Quotes:
" There was no explicit easing bias but the BoC probably got as close to the edge as it possibly could without jumping over and that was good enough to drive USD/CAD towards the 1.11 area. Additional comments from Gov. Poloz in a TV interview late yesterday—indicating that the “door is slightly more open” to a rate cut—triggered more gains in Asian trade."
"wanted to buy the dip—and so did everybody else—yesterday. Perhaps we shouldn’t be so choosy. We still think there is a lot of room left in this move and, as pullbacks few and far between, we might just have to hold our nose and jump in."
"With US bond yields firming and Canadian yields in the belly of the curve easing, the 5-year US-Canada spread moved to a small premium (US yields over) for the first time since 2009 yesterday."
"Putting that data into our informal 5-year spreads/terms of trade regression model, we get a USD/CAD FV estimate of 1.17 currently. Note the CAD correlation with the 5-year spread is still relatively low but strengthening sharply in our matrix, above."
"A couple of things struck us about the policy decision and the post-announcement press conference. Firstly Governor Poloz looked more at ease and confident in his messaging."
"Secondly, there was no attempt to steer the market away from the impression that the BoC wants a still lower CAD; the MPR noted that, despite the recent depreciation, the CAD remained strong while Governor Poloz himself termed the weaker CAD the icing on the cake for exporters (which he reiterated en francais). He might just as well have said; we like it lower."
"From here, the high 1.10s/low 1.11s will look attractive for USD buyers. We look for a positive surprise from retail sales today so any modest CAD bounce—it is unlikely to be much at all—is liable to be jumped on."
"Our technical target remains 1.1265 but as we push on through the 1.12 area, the market will likely start to think of 1.15/1.16 as reachable from a technical perspective. Given our current FV assessment for USD/CAD, we can’t disagree."
Key Quotes:
" There was no explicit easing bias but the BoC probably got as close to the edge as it possibly could without jumping over and that was good enough to drive USD/CAD towards the 1.11 area. Additional comments from Gov. Poloz in a TV interview late yesterday—indicating that the “door is slightly more open” to a rate cut—triggered more gains in Asian trade."
"wanted to buy the dip—and so did everybody else—yesterday. Perhaps we shouldn’t be so choosy. We still think there is a lot of room left in this move and, as pullbacks few and far between, we might just have to hold our nose and jump in."
"With US bond yields firming and Canadian yields in the belly of the curve easing, the 5-year US-Canada spread moved to a small premium (US yields over) for the first time since 2009 yesterday."
"Putting that data into our informal 5-year spreads/terms of trade regression model, we get a USD/CAD FV estimate of 1.17 currently. Note the CAD correlation with the 5-year spread is still relatively low but strengthening sharply in our matrix, above."
"A couple of things struck us about the policy decision and the post-announcement press conference. Firstly Governor Poloz looked more at ease and confident in his messaging."
"Secondly, there was no attempt to steer the market away from the impression that the BoC wants a still lower CAD; the MPR noted that, despite the recent depreciation, the CAD remained strong while Governor Poloz himself termed the weaker CAD the icing on the cake for exporters (which he reiterated en francais). He might just as well have said; we like it lower."
"From here, the high 1.10s/low 1.11s will look attractive for USD buyers. We look for a positive surprise from retail sales today so any modest CAD bounce—it is unlikely to be much at all—is liable to be jumped on."
"Our technical target remains 1.1265 but as we push on through the 1.12 area, the market will likely start to think of 1.15/1.16 as reachable from a technical perspective. Given our current FV assessment for USD/CAD, we can’t disagree."