How To Position For Further CAD Strength Post-BoC – TD

The Bank of Canada’s hawkish hike has sent the loonie skyrocketing. What’s next? Here is the view from TD:

Here is their view, courtesy of eFXnews:

TD FX Strategy Research notes that the BoC surprised the market consensus at its September meeting hiking the policy rate another 25bp.

The Bank has now removed the insurance cuts and the outlook shifts to the potential for normalization…The OIS market is already priced at 40% for Oct and 60% for Dec, so we think another round of decent data will offer support for another hike before year-end.

This backdrop favors  more CAD outperformance, in particular against the likes of NZD, which argues for a push towards the 2016 lows of 0.8597.

For USDCAD, the break of the lows off the 2012 trend line and other key technical breaks favors a near-term break below 1.20,” TD argues.

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