USD/CAD: Room For Further Upside N-Term; Dips A Buy – TD

TD FX Strategy Research believes that the near-term outlook favors more upside in USD/CAD and prefers buying the pair on dips. 

“For a start, we noted recently that much of the goods news had been priced into CAD. This reflects the shift in market positioning and the recent deceleration in data surprises. Indeed, besides the EUR, CAD is another major currency that has a mix of data slowdown (current ESI versus 3mma) and a rich currency.  

For the latter, we compare the current level of the nominal effective exchange rate to the 1yma.  This contrasts with our USDCAD HFFV, but our estimates of the US/CA 2y rate spreads also point to a higher level than implied by the current spread.   

Source: TD Securities Research

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