USD/CAD: levels, Ranges, Targets

 

 

 

Canada’s yield spreads run 1.1, 0.70, 0.39 and 0.38. Viewed from OIS rates at 0.20’s all day long, rates trade below the furthest 10 to 30 spreads. The key to CAD’s OIS rates is long ago Canada extricated itself from Libor as was the new practice for many nations so to focus on internal systems to price exchange rates. The sidebar issue to Libor elimination is it explains why exchange rates no longer move in perfect unison. USD/CAD today will move big but all other nation exchange rates won’t follow. The glue that held nations in check together was Libor.

If CAD headline interest rates are viewed from 2 years out at 0.83 then a raise from 0.50 to 0.75 is viewed as a one and done. As much as I viewed this issue, I don’t see the multiple hikes over time as one bank on this site reported yesterday.More fake news possibly from the market people. I honestly can’t stomach these people.

Most importantly, I don’t see a valid reason why the BOC should raise. My CAD expert friend at Thomson Reuters reported yesterday, USD/CAD dropped 4% since the last meeting and Terms of trade for Canada improved. Canada lost on the Lumber issue but overall its not the big mover for Canada exports in Oil, Automobiles and Car parts.

Viewed from the USD triggers that move USD/CAD and from its current oversold condition, CAD/USD is heading lower and good prospect for further export gains. The level of the current exchange rate appears not as the raise issue but rather economics. Yet Inflation at 1.3 and GDP on the floor over the past 4 Quarters is question for hold rather than raise. Unless the raise question is arrest Inflation now and contain it over time. When Carney went to the BOE, he left Poloz with a sincere disaster.

Thomson Reuters prices 95% shot Poloz raises. I see 50 / 50 and on the edge.

Interested, 43 exchange rates as well as Levels, Ranges and targets were posted on my blog, including USD/ASIA in light of North Korea and Chinese dominance to the South China Sea islands and islands that don’t belong to China based on past treaties.

USD/CAD. Topside sell points 1.2948, 1.2979. Today’s range point exists at 1.3011. Bottom side 1.2826 is solidly oversold then 1.2834 and 1.2868.

The perspective at 1.3011, extreme prices are seen from 1.3037 which means 1.3011 will be a tough break. Longer term, a 591 and 335 day averages are located at 1.3148 and 1.3182 then comes 1.3191. An 847 day average exists below at 1.2587 yet for today, 1.2600’s inits extremes won’t allow 1.2587 to break anytime soon.

 

Brian Twomey

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