USD/CAD: Maintain a long position, targeting 1.3700 – Nomura

Dhwani Mehta FXStreet

Analysts at Nomura recommend a long position on the USD/CAD, with a target of 1.3700, enlisting factors that could weigh on the Canadian Dollar (CAD).

Key quotes

“1. Softer Terms of Trade in Canada: Nomura believes that Canada's terms of trade, which is the ratio of export prices to import prices, is softening. This could mean that the prices for Canadian exports are falling relative to the prices of its imports, which can negatively impact the Canadian economy and, consequently, the CAD.”

“2. Short Covering by Real Money Investors: Nomura suggests that real money investors have mostly completed short covering. Short covering refers to the buying back of assets that were initially sold short (betting that their prices would decrease). With short covering mostly done, there may be less buying pressure to support the CAD.”

“3. US Economic Resilience Adversely Impacting High-Beta G10 Currencies: The resilience of the US economy, according to Nomura, can have an adverse impact on high-beta G10 currencies, including the CAD. High-beta currencies are typically more volatile and sensitive to changes in market conditions. As the US economy remains resilient, it may attract investment away from riskier high-beta currencies like the CAD.”

“Considering the factors mentioned above, Nomura maintains a long position on USD/CAD, targeting 1.37.”

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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