• We noted last week that the USDCAD sell-off was running out of momentum and, indeed, the USD looks poised to close higher on the week through the close of business today for the first time since early July. This has the makings of a meaningful technical reversal, with the USD moving above key trend resistance (more on this below), and the USD rebound coincides with a point in the year (more or less) when CAD rallies typically start to fade and the USD readies for a recovery into Q4. We think there is strong evidence to suggest that the USD’s broader seasonal bid typically gets underway way a little earlier in than normal in US presidential election years – which seems set to compound the late year demand for the USD in the next few weeks. Fundamentally, we think the USD continues to face some significant headwinds in the longer run (given reduced growth and yield advantages) but that may not prevent the USD from picking up a little more support in the next few weeks.
• Fundamental developments this week provided little directional information for the CAD. The Bank of Canada left policy unchanged, as expected, with the statement providing no fresh insight into the policy outlook. Equally, Governor Macklem’s economic progress report and the press conference that followed seemed designed to studiously avoid giving anything away – other than reassures that extraordinary accommodation measures will be maintained for some time to come. These events failed to shed any specific light on the central bank’s thinking with regard to its policy framework review. In the US, disappointing Initial and Continuing Claims data suggest that the rebound in US jobs may be stalling. Our charts below highlight that the CAD’s sensitivity to risk may be picking up again while technical signals are tilting USD-bullish. Our week-ahead model suggests upside potential for the USD towards the low 1.32 zone within a broad 1.30-1.34 range. We expect the USD to remain well-supported on modest dips.
• Fundamental developments this week provided little directional information for the CAD. The Bank of Canada left policy unchanged, as expected, with the statement providing no fresh insight into the policy outlook. Equally, Governor Macklem’s economic progress report and the press conference that followed seemed designed to studiously avoid giving anything away – other than reassures that extraordinary accommodation measures will be maintained for some time to come. These events failed to shed any specific light on the central bank’s thinking with regard to its policy framework review. In the US, disappointing Initial and Continuing Claims data suggest that the rebound in US jobs may be stalling. Our charts below highlight that the CAD’s sensitivity to risk may be picking up again while technical signals are tilting USD-bullish. Our week-ahead model suggests upside potential for the USD towards the low 1.32 zone within a broad 1.30-1.34 range. We expect the USD to remain well-supported on modest dips.
Comment:
all target achieved