Back
6 Jan 2015
CAD might test 1.20 levels – Scotiabank
FXStreet (Barcelona) - Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, explains that USD/CAD might test 1.20 levels as oil softens, further sees the risk for near-term CAD trades being further weakness.
Key Quotes
“CAD has lost only 0.1% and holding in quite well considering WTI oil is trading with a $48 handle. The complication for CAD today is how does a rumoured increase in Chinese stimulus combined with the bump low oil provides for global (and U.S.) growth.”
“For now, as risk aversion is rising and oil continues to fall at an accelerated pace, we see the risk for near-term CAD traders being further weakness.”
“In USDCAD terms there is risk of a test up to 1.20 (or in CAD terms a test down to 0.83) preconditioned on ongoing oil weakness.”
“There are a few mitigating factors, which will see CAD weaken against the USD but likely strengthen against currencies like EUR, AUD and GBP, including: the positive impact of a strong U.S. economy combined with the weakness in CAD on supporting exports and the Canadian economy; Oil prices weigh on inflation, but a weak CAD will help to mitigate this.”
“Low oil prices are positive for global growth and CAD is a global growth sensitive currency; accordingly any further stimulus for China combined with the impact of low oil prices on growth will support CAD.”
“Accordingly, we see the medium term outlook for CAD as negative against the USD; but with mitigating factors that will see it outperform several other G10 currencies.”
Key Quotes
“CAD has lost only 0.1% and holding in quite well considering WTI oil is trading with a $48 handle. The complication for CAD today is how does a rumoured increase in Chinese stimulus combined with the bump low oil provides for global (and U.S.) growth.”
“For now, as risk aversion is rising and oil continues to fall at an accelerated pace, we see the risk for near-term CAD traders being further weakness.”
“In USDCAD terms there is risk of a test up to 1.20 (or in CAD terms a test down to 0.83) preconditioned on ongoing oil weakness.”
“There are a few mitigating factors, which will see CAD weaken against the USD but likely strengthen against currencies like EUR, AUD and GBP, including: the positive impact of a strong U.S. economy combined with the weakness in CAD on supporting exports and the Canadian economy; Oil prices weigh on inflation, but a weak CAD will help to mitigate this.”
“Low oil prices are positive for global growth and CAD is a global growth sensitive currency; accordingly any further stimulus for China combined with the impact of low oil prices on growth will support CAD.”
“Accordingly, we see the medium term outlook for CAD as negative against the USD; but with mitigating factors that will see it outperform several other G10 currencies.”