TD Research maintains a bullish bias on CAD following yesterday’s BoC policy statement in which the central bank made a ‘gentle pivot’ towards a more neutral policy stance.
“Indeed, the Bank no longer sees slack as “material.” At the same time, one of the more bullish aspects for CAD was the acknowledgement that the adjustment to the oil shock was ’largely complete.’ This helped to reinforce the constructive tone of the statement, especially as the Bank underscored the encouraging trend in the data and the outlook for growth,” TD notes.
On Oil and CAD, TD notes that the next 24 hours will feature headlines related to OPEC meeting.
“As expected, OPEC/Russia delivered the nine-month extension in production cuts. Deeper extensions would help boost oil prices further but the risks over the coming day is that we see markets ’sell the fact,’ as this was priced in. A near-term pullback in oil more likely reflects near-term event positioning. Still, we see further upside risks to oil over the coming months, owing to the potential of further correction in the global imbalances,” TD argues.
On the technical front, TD notes that USD/CAD has made a convincing break of the 1.35 level and now focus turns a test of the 200dma near 1.33.
In line with this view, TD maintains a short USD/CAD position* from 1.37 targeting a move to 1.32.
Source: TD Securities Research
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