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30 Dec 2014
USD/CAD glides into the New Year - TDS
FXStreet (Barcelona) - Shaun Osborne and Martin Schwerdtfeger, FX Strategists at TD Securities, think the upside risk for USD/CAD far outweighs any downside for the pair in early-2015, further noting that the Fed rate high risk and widening US-Canada interest rate spreads will keep the Dollar strong.
Key Quotes
“USDCAD failed to match the thrust of the decline in the price of WTI crude yesterday, mirroring the broader performance of the USD instead. Indeed, an intraday 5% peak-to-trough swing in the price for the commodity only saw a modest 0.4% push higher in funds.”
“We think the risk for an extension to the upside in USDCAD early in the new year far outweighs the downside. US - Canada interest rate spreads keep widening in favor of the USD despite the decline both yields over the last couple of days, and, with the market pricing in a 56% probability of a first hike by the Fed in July 2015, the odds are spreads will continue to support further USD strength.”
“And, with crude oil running the gauntlet, there are few if any arguments to stem CAD’s gradual decline vis-à-vis the greenback. Our Fair Value models continue to indicate a higher FV for the pair — between 1.1820 and 1.1960, depending on the model.”
“Today and tomorrow, tough, a 1.1575/1.1675 range — could well be 1.1600/50, except for a spike due to thin liquidity —should carry us through into the New Year.”
Key Quotes
“USDCAD failed to match the thrust of the decline in the price of WTI crude yesterday, mirroring the broader performance of the USD instead. Indeed, an intraday 5% peak-to-trough swing in the price for the commodity only saw a modest 0.4% push higher in funds.”
“We think the risk for an extension to the upside in USDCAD early in the new year far outweighs the downside. US - Canada interest rate spreads keep widening in favor of the USD despite the decline both yields over the last couple of days, and, with the market pricing in a 56% probability of a first hike by the Fed in July 2015, the odds are spreads will continue to support further USD strength.”
“And, with crude oil running the gauntlet, there are few if any arguments to stem CAD’s gradual decline vis-à-vis the greenback. Our Fair Value models continue to indicate a higher FV for the pair — between 1.1820 and 1.1960, depending on the model.”
“Today and tomorrow, tough, a 1.1575/1.1675 range — could well be 1.1600/50, except for a spike due to thin liquidity —should carry us through into the New Year.”