USDCAD: bullish in the near term - BNPP

Sandeep Kanihama FXStreet Contributor

The markets expect September CPI to accelerate in Canada, but analysts at BNP Paribas think the risks are tilted to the upside for USDCAD in the near term as even though the CAD positioning has been cut ahead of the 26 October BoC meeting, but remains net long.

Key Quotes

“Canadian September CPI and August retail sales will be released on Friday. The markets expect inflation to have accelerated to 1.7% y/y (versus 1.4% y/y in August. Our short-term fair value model STEER™ has taken profit on its short USDCAD signal for 0.85% gain and the pair is now trading in line with the model’s estimate of its fair value. USDCAD STEER has started to rise as US yields have risen and we think this should continue. We target USDCAD rising to 1.27 over the next month.”

“Our BNP Paribas FX Positioning Analysis suggests FX investors have unwound some of their long CAD positions ahead of next week’s Bank of Canada (BoC) meeting (26 October). USDCAD has already started to rise from its September lows (1.21) but the market remains net long the CAD (at +17 on a -/+50 scale). While expect USDCAD to rise into year-end, in the medium term we think USDCAD should remain broadly stable and target 1.25 in Q1 2018. The Fed and BoC are priced for broadly equivalent pricing over the next 18 months, which is in line with our view.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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