Specialized Focus on the Canadian Dollar – USD/CAD Breaks year Average, Looks Higher

The Canadian dollar continues to trade away from prior bullish targets relative to the US Dollar, and has weakened considerably since the Bank of Canada re-emphasized caution in their future rate hike plans. When looking to the options market for insight, you’ll see an elevation in expected volatility at the two-week tenor that includes the FOMC rate decision on May 2 and the US Non-Farm Payroll data. Events like this are critical for determining higher probability trend continuation or reversal moves. Currently, option premiums for the outsized CAD gains have fallen against the US Dollar to the lowest in a month. The upside focus for traders as the spot rate sits below 1.2900 is the March 23/22 highs of 1.2940/49 and the psychologically important 1.3000. Support can be found at the April 23 low of 1.2747. Recently, USD/CAD traded above its 12-month average near 1.2800 and has tended to trade between the one- and two-standard deviation bands around that 12-month average. The bands have a one-standard-deviation up target for the 1-year range at 1.3173 and a one-standard-deviation down target of 1.2411, which is near the 2018 low from early February.


Taking a gander at the outline above, any reasonable person would agree that energy has broken higher and CAD is best left played against exceptionally frail monetary forms like the japenese yen, Swiss Franc, or Newzealand Dolar. The Canadian Dollar is losing steam and could keep on doing so until real market occasions of NFP and FOMC give markets a comment reprice. 

For the time being, just a crush spirit underneath 1.2815, the earlier union floor above would stop the fleeting bullish force though a break over 1.2950 would concrete the prompt view toward and likely over 1.3000. Over 1.30, dealers can look to the positive 1-sexually transmitted disease. deviation level of the year normal at 1.3175

We commonly take a contrarian view to swarm assumption, and the reality dealers are net-long recommends USDCAD costs may keep on falling. Situating is more net-long than yesterday yet less net-long from a week ago. The mix of current notion and late changes gives us a further blended USDCAD exchanging inclination.
Written by "Hassnain Malik"

1 comment: