CAD: The Loonie Takes Flight; What’s The Trade? – SocGen

CAD: The Loonie Takes Flight; What’s The Trade? – SocGen

The Canadian GDP report came out as expected and did not stop the Canadian dollar. USD/CAD is firmly under 1.30. What’s next?

Here is their view, courtesy of eFXnews:

Societe Generale FX  Strategy Research notes that the hawkish commentary from Bank of Canada officials this month has taken the FX market by storm.

“The signal from the BoC is very clear, and a rate hike is imminent, if not in the July meeting, then in September. A full economic update will be released with the BoC’s monetary policy report after the 12 July meeting,” SocGen argues.

“We had maintained that the Canadian dollar is undervalued, and we had previously expected USD/CAD to trade to 1.30 by early 2018. That target level has now been reached, and the medium-term outlook for the CAD has turned more much bullish given the BoC’s hawkish shift. The loonie’s undervaluation should support further appreciation.  Our technical strategist has pointed to USD/CAD 1.25 as the target once support at 1.30 is broken, as is likely in coming weeks,” SocGen adds.

What’s the trade?

Perhaps more interesting from a relative viewpoint is to  go short NZD/CAD  following its failure to break through 0.98 earlier this month.  A decline to NZD/CAD 0.92 by year-end seems to be in the cards now.  A rally in crude oil prices towards year-end would be an added benefit to the loonie, ” SocGen advises.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.