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18 Nov 2015
USDCAD price action contained - TDS
FXStreet (Delhi) – Research Team at TDS, notes that the USDCAD price action has been rather lacklustre recently as the 1.3300 figure has served as a resting state for funds with spot is trading in line with our fair value estimate.
Key Quotes
“We have for the past few sessions noted our bias to see the CAD weaken as the data run this week will be bearish for the currency. Thus far, our view on the data has been correct but USDCAD has been unable to sustain the bid. We reckon that this Friday’s retail sales report (expected to contract by 0.8%) will have a more durable impact on funds and solidify our monthly GDP tracking estimate for a contraction in September (which imposes a downward bias on Q3 and Q4 GDP estimates).”
“But, today may be a more eventful session for USDCAD with the crude inventory report this morning and the FOMC minutes later this afternoon. If the API report earlier this week is any indication, crude inventories may be more bullish for oil – at least, initially – with the risk of a small drawdown. Note that last week’s inventory report was very bearish, but USDCAD could not be bothered.”
“We think markets are psychologically primed to expect consistent builds in inventories, so a drawdown today could leave the CAD prone to a squeeze. This would be short-lived however, with the Fed minutes in the afternoon where we expect the tone to be hawkish. As noted above, we are not sure if it will be hawkish enough to provide another bid to the USD especially after such a strong payrolls report that came after the October meeting but given our expectation for the domestic data to be very weak on Friday we would look at a dip in USDCAD (towards 1.3200/20) as a relatively appealing opportunity to add to strategic longs.”
Key Quotes
“We have for the past few sessions noted our bias to see the CAD weaken as the data run this week will be bearish for the currency. Thus far, our view on the data has been correct but USDCAD has been unable to sustain the bid. We reckon that this Friday’s retail sales report (expected to contract by 0.8%) will have a more durable impact on funds and solidify our monthly GDP tracking estimate for a contraction in September (which imposes a downward bias on Q3 and Q4 GDP estimates).”
“But, today may be a more eventful session for USDCAD with the crude inventory report this morning and the FOMC minutes later this afternoon. If the API report earlier this week is any indication, crude inventories may be more bullish for oil – at least, initially – with the risk of a small drawdown. Note that last week’s inventory report was very bearish, but USDCAD could not be bothered.”
“We think markets are psychologically primed to expect consistent builds in inventories, so a drawdown today could leave the CAD prone to a squeeze. This would be short-lived however, with the Fed minutes in the afternoon where we expect the tone to be hawkish. As noted above, we are not sure if it will be hawkish enough to provide another bid to the USD especially after such a strong payrolls report that came after the October meeting but given our expectation for the domestic data to be very weak on Friday we would look at a dip in USDCAD (towards 1.3200/20) as a relatively appealing opportunity to add to strategic longs.”