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23 Nov 2015
USDCAD: Finally, a break above the stubborn resistance - TDS
FXStreet (Delhi) – Research Team at TDS, suggests that last week’s negative data run unfolded as we had expected but USDCAD had difficulty in getting much liftoff with funds unable to push above 1.3380 resistance until in the overnight session (on little liquidity).
Key Quotes
“Retail sales was weak as we expected, falling by 0.5% m/m on both the headline and core measures but after a momentary push higher, USDCAD eventually and counterintuitively retreated to the 1.33. Perhaps this had to do with the fact that volumes nudged higher by 0.1% m/m, though our tracking for monthly GDP (September) remains tilted towards a 0.1% decline. This will be released on December 1st and, when taken in conjunction with a holiday shortened week due to US Thanksgiving and an empty Canadian data calendar suggest that USDCAD could struggle to find material upside.”
“Though the calendar will be quiet in Canada this week, we do receive a handful of top-tier data in the US including the second estimate of US GDP (Q3), durable goods (October) and core PCE (October). On a broad basis, we expect the data to lean constructively for the US so that should we are still inclined to see USDCAD bid.”
“USDCAD, like many other currencies, have been trendless recently and quite frankly, we think the market focus is elsewhere. Specifically, with the ECB meeting on December 3rd just around the corner (we expect more cuts and augmentation of QE), there is just not as much interest to trade USDCAD.”
“That said, USDCAD was able to make a move above thick resistance at 1.3380 in the overnight session. It appears that funds has finally caught up to the sell-off in crude oil (~$40.50/bbl currently in WTI). Spot trades just at the figure (1.34), which is in line with our daily fair value estimate. A close above 1.3380 would be mildly bullish. Investors will need to remain patient however.”
“Even though the technicals (daily RSIs and stochastics) suggest that the rally is looking a touch fatigued the downside looks fairly limited in our view. Solid support comes in around the 1.3200/50 area – a region that corresponds to the 61.8% Fib level from the October lows. We maintain our year-end target of 1.37.”
Key Quotes
“Retail sales was weak as we expected, falling by 0.5% m/m on both the headline and core measures but after a momentary push higher, USDCAD eventually and counterintuitively retreated to the 1.33. Perhaps this had to do with the fact that volumes nudged higher by 0.1% m/m, though our tracking for monthly GDP (September) remains tilted towards a 0.1% decline. This will be released on December 1st and, when taken in conjunction with a holiday shortened week due to US Thanksgiving and an empty Canadian data calendar suggest that USDCAD could struggle to find material upside.”
“Though the calendar will be quiet in Canada this week, we do receive a handful of top-tier data in the US including the second estimate of US GDP (Q3), durable goods (October) and core PCE (October). On a broad basis, we expect the data to lean constructively for the US so that should we are still inclined to see USDCAD bid.”
“USDCAD, like many other currencies, have been trendless recently and quite frankly, we think the market focus is elsewhere. Specifically, with the ECB meeting on December 3rd just around the corner (we expect more cuts and augmentation of QE), there is just not as much interest to trade USDCAD.”
“That said, USDCAD was able to make a move above thick resistance at 1.3380 in the overnight session. It appears that funds has finally caught up to the sell-off in crude oil (~$40.50/bbl currently in WTI). Spot trades just at the figure (1.34), which is in line with our daily fair value estimate. A close above 1.3380 would be mildly bullish. Investors will need to remain patient however.”
“Even though the technicals (daily RSIs and stochastics) suggest that the rally is looking a touch fatigued the downside looks fairly limited in our view. Solid support comes in around the 1.3200/50 area – a region that corresponds to the 61.8% Fib level from the October lows. We maintain our year-end target of 1.37.”