Short term
Trade view / 20 May 2016 at 7:54 GMT

#SaxoStrats: USDCAD heading to test 1.3300 post BoC

Head of FX Strategy / Saxo Bank


The tremendous CAD rally on the back of a recovery in crude prices from January and into late April has faded rapidly, as higher oil prices are seen as having less potential to drive economic growth in Canada unless prices accelerate considerably from here. 

As well, some of the recent upside in oil prices was due to production shutdowns in Canada on raging wildfires. On top of this, the secular CAD weakness is also deserved on considerable structural shortcomings, including a large Canadian current account deficit and overleveraged private sector. 

On the USD side of the equation, the recent USD recovery is on renewed Fed hawkishness and the need to price in higher odds of a June or July Fed rate hike. Technically, the recent break above the 1.3000 area points to the next objective zone between 1.3300 and 1.3350.

Management and risk description

The key risk to the trade is that the risk parameters have been set a bit too tightly and/or that Canadian data today (CPI and Retail Sales) surprise to the upside or that the Bank of Canada’s guidance next week proves less dovish than expected.

USDCAD since end of 2015 (click to enlarge)
USDCAD short term

Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more


Entry: 1.3075-1.3095

Stop: 1.3024

Target: 1.3300

Time horizon: approx. 1 week

USDCAD longterm (5yr) chart (click to enlarge)

Source: Saxo Bank

— Edited by Clemens Bomsdorf

Non-independent investment research disclaimer applies. Read more


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