USD/CAD: Despite CAD resilience this week, further weakness likely – Rabobank
19.08.2022, 16:25

USD/CAD: Despite CAD resilience this week, further weakness likely – Rabobank

The USD/CAD pair is about the end the week with a gain of more than 200 pips. Still, the loonie managed to rise sharply versus NZD and AUD. Analysts at MUFG Bank still see the USD/CAD moving further to the upside, on the back of a stronger US dollar. They have a target of 1.3420 and a stop-loss of 1.2600. 

Key Quotes: 

“Part of the resilience for CAD this week in depreciating less than the rest of G10 was due to the stronger underlying measures of inflation that helped fuel some increased pricing for rate hikes by the BoC.”

“The near-term outlook for crude oil remains poor with the slowdown in global growth weighing more heavily on the price of oil. In addition, there have been numerous reports indicating Russia ability to remain a key supplier of crude oil which has left the supply-demand balance globally less supportive for crude oil prices.”

“We also are wary of the impact of rate hikes becoming more evident in Canada more quickly given the leverage in Canada housing is higher.”

“The risk to this trade is a further rally in equity markets given the strong correlation between CAD and global equity market performance. While we do not expect a sharp reversal in equity markets over the short-term, but the general diminished optimism over inflation coming down suggests risks to the downside for equities are building.”
 

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