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Nov 18 - 06:55 PM

USD/CAD: Penciling-In Lower Spot Out Until 6-Months - Danske

By eFXdata  —  Nov 18 - 03:00 PM

Danske Research adopts a bearish bias on USD/CAD over the medium-term. 

"We fundamentally like to consider USD/CAD as ‘USD/NOK but with a lower beta to global risk sentiment and oil prices’. This is due to the CAD’s close connection to the USD (Canada-US trade link) and Canada’s lower dependence on oil. A way to illustrate the close connection between USD/CAD and USD/NOK is to look at short-dated correlations, which currently run at close to 80%...Consequently, in September and October, USD/CAD rose by less than USD/NOK, while the recent spark to the global reflation theme has benefitted NOK more than CAD," Danske notes. 

"Looking ahead, we expect the global reflation theme to remain in the driver’s seat, so we pencil in a lower spot especially out until 6M. We forecast USD/CAD at 1.30 in 1M (previously 1.34), 1.27 in 3M (was 1.23), 1.27 in 6M (was 1.32) and 1.28 in 12M (was 1.32)," Danske adds. 

Source:
Danske Research/Market Commentary

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