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Mazen Issa, Senior FX Strategist at TD Securities points out they see no clear catalyst for a break lower in the USD/CAD pair and they remain “committed USD bulls”. They consider a lot of good news is priced in CAD. 

Key Quotes: 

“USD/CAD’s sharp turnaround has put crucial support in view. Thus far, the pair has held the 1.3850/70 area. This is the third time it has been tested as part of a broader descending triangle since the March highs. Thus, a break below this support would be bearish the pair, particularly if confirmed with DMA crossovers that would expose 1.3766. Meanwhile, a move through 1.4050/80 daily downtrend resistance will open topside extension.”

“We see no clear catalyst for a downside breakout, and we remain committed USD bulls. The vol premium for USDs has eased but not eroded suggesting some shyness to fully bet against the USD.”

“The CAD has been strongly correlated to equities. In isolation, this is not a strong enough leg to stand on.”

“We rather think that a lot of good news is already in CAD’s price. Positioning is skewed short, but we think these are strategic in nature. Meanwhile, a broad USD pullback appears well advanced on our measure.”