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10 Dec 2014
USD/CAD still undervalued – TDS
FXStreet (Barcelona) - The TD Securities Team believes that USD/CAD is still undervalued relative to negative developments in US-Canada spreads and soft oil prices.
Key Quotes
“The AUD and NZD (RBNZ policy meeting tonight may try to talk down the Kiwi) have been relative out-performers on the session so far today as equity markets in Europe have steadied but the CAD has not participated and is one of the worst-performing G-10 currencies on the day so far.”
“We continue to think that USDCAD is undervalued relative to some fairly clear negative developments—wider US-Canada spreads (not far off the highs from the middle of the year which were themselves the most USD-supportive since 2009) and soft oil prices.”
“WTI crude oil prices rose marginally yesterday after making new cycle low but the market has turned lower again so far today and retains a weak undertone.”
“Out spot FV estimate for USDCAD this morning stands at 1.1700, down marginally from Tuesday’s read. Fundamentals still suggest the CAD should be weaker.”
“On the charts, USDCAD closed well off the lows but the wide range on the day after the new high made just above 1.15 and the lower close still left a big, bearish key reversal day on the daily chart. These sorts of signals warrant attention, especially after extended runs—usually. We note the signal but are loathe to read too much into it at this point—we just do not think USDCAD losses yesterday reflect a real change in sentiment or the trend.”
“We may see a little stiffer resistance in the 1.15 area near-term but we also expect firm support on dips to the low 1.14s.”
Key Quotes
“The AUD and NZD (RBNZ policy meeting tonight may try to talk down the Kiwi) have been relative out-performers on the session so far today as equity markets in Europe have steadied but the CAD has not participated and is one of the worst-performing G-10 currencies on the day so far.”
“We continue to think that USDCAD is undervalued relative to some fairly clear negative developments—wider US-Canada spreads (not far off the highs from the middle of the year which were themselves the most USD-supportive since 2009) and soft oil prices.”
“WTI crude oil prices rose marginally yesterday after making new cycle low but the market has turned lower again so far today and retains a weak undertone.”
“Out spot FV estimate for USDCAD this morning stands at 1.1700, down marginally from Tuesday’s read. Fundamentals still suggest the CAD should be weaker.”
“On the charts, USDCAD closed well off the lows but the wide range on the day after the new high made just above 1.15 and the lower close still left a big, bearish key reversal day on the daily chart. These sorts of signals warrant attention, especially after extended runs—usually. We note the signal but are loathe to read too much into it at this point—we just do not think USDCAD losses yesterday reflect a real change in sentiment or the trend.”
“We may see a little stiffer resistance in the 1.15 area near-term but we also expect firm support on dips to the low 1.14s.”