TenkoFX - Analytics


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    USD/CAD inter-markets: recovery on sight?

    After three consecutive session with losses, USD/CAD seems to have recovered the smile today, retaking the key 1.2700 barrier and advancing to fresh daily highs around 1.2760. The extent of the up move remains uncertain however, as the prospects for the US Dollar have seen quite a deterioration since Friday’s Payrolls.The main catalysts behind the ongoing recovery can be found on the current leg lower in crude oil prices, which is dragging the barrel of West Texas Intermediate nearly 2% to the $50.30 area after hitting fresh 2016 highs above the $51.00 mark yesterday, removing part of the recent tailwinds from CAD.However, and pouring cold water over the recovery of USD, US yields have reverted the initial positive note, while Fed Funds future contracts seems to have stabilized around mid-May levels, showing the probability of a rate hike by the Fed at next week’s meeting remains marginal – less than 4%.Additionally, in its Canadian version, yields of the 5-year and 10-year bonds are losing ground as well, while equities tracked by the TSX60 are mostly in red for the time being.Looking ahead, crude oil dynamics will remain almost the exclusive driver behind the pair’s price action, while the spread between US and CAD yields will accompany the sentiment, as we get closer to the FOMC meeting next week.

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