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26 Jan 2015
USD/CAD might move towards 1.27 by year-end – Nomura
FXStreet (Barcelona) - Analysts at Nomura revise their forecast for USD/CAD after BoC’s surprise move, anticipating that the pair might head towards 1.29 in Q3 2015 and to 1.27 by 2015-end.
Key Quotes
“Currently, the market has not yet fully priced in another rate cut by the BoC. The BA futures contracts show that there is about 7bp of cuts priced in going into March and 15bp of cuts into December. Given our view that the BoC is very likely to cut again if oil remain around current levels, we believe that a greater probability of rate cut should be priced in by the market.”
“Interestingly, according to the positioning data from the CFTC CAD is essentially the only G10 currency, where short positions are not in extreme short territory. This suggests that short CAD positions are not widely owned, especially by real money investors, and suggests that further accumulation of short positions is likely.”
“Finally, on the back of the surprise move by the BoC, we also revised our forecast for USD/CAD. We now expect the USD/CAD to reach 1.25 at the end of Q1, 1.27 at the end of Q2, 1.29 at the end of Q3 and end the year at 1.27.”
“With this in mind, we believe that the USD/CAD could continue to move higher in the coming weeks. As a result, we continue to believe that our long USD/CAD position makes sense and believe that the USD/CAD could reach 1.25. However, we tighten the stop to 1.2090 in order to protect.”
Key Quotes
“Currently, the market has not yet fully priced in another rate cut by the BoC. The BA futures contracts show that there is about 7bp of cuts priced in going into March and 15bp of cuts into December. Given our view that the BoC is very likely to cut again if oil remain around current levels, we believe that a greater probability of rate cut should be priced in by the market.”
“Interestingly, according to the positioning data from the CFTC CAD is essentially the only G10 currency, where short positions are not in extreme short territory. This suggests that short CAD positions are not widely owned, especially by real money investors, and suggests that further accumulation of short positions is likely.”
“Finally, on the back of the surprise move by the BoC, we also revised our forecast for USD/CAD. We now expect the USD/CAD to reach 1.25 at the end of Q1, 1.27 at the end of Q2, 1.29 at the end of Q3 and end the year at 1.27.”
“With this in mind, we believe that the USD/CAD could continue to move higher in the coming weeks. As a result, we continue to believe that our long USD/CAD position makes sense and believe that the USD/CAD could reach 1.25. However, we tighten the stop to 1.2090 in order to protect.”