Nov 03, 2022

VOT Research Desk

The USD/CAD pair is seeing selling pressure after hitting a new weekly high during the Tokyo session at 1.3724. It would be premature to declare that the risk aversion theme has subsided because a collapse in the asset would only have a little greater reactivity than the late New York surge.

The US dollar index (DXY) has fallen below the crucial support level of 112.00, while S&P500 futures have shown a recovery.

The 10-year US Treasury yields have steadied at 4.12% as a result of the Federal Reserve (Fed) raising interest rates further and issuing hawkish guidance.

Although policy tightening has raised interest rates to their highest level (between 3.75 and 4% since 2008), Fed chair Jerome Powell has stated that stopping tightening efforts is unlikely.

Although short-term inflation forecasts have not yet shown a significant decrease, long-term inflation expectations are firmly anchored.

The Fed will therefore keep moving forward in order to reach the discussed terminal rate of 4.75%. Currency pairs that are seen as risky are exhaling in relief as a result of the fact that big swings are typically followed by a decline in volatility.

The housing market may experience serious problems in the future as a result of rising interest obligations and potential consumer hold offs on new home purchases. In addition, investors will monitor the costs associated with delinquency. The spotlight will be on US and Canadian jobs data on Friday.

Compared to the previous announcement of 263k, the US Nonfarm Payrolls (NFP) is seen to be lower at 200k. While rising to 3.6%, the unemployment rate.

Canada’s Net Change in Employment, however, has decreased to 10k from 21.1k in the past. While the unemployment rate is predicted to fall to  5.2%.

Oct 21, 2022

VOT Research Desk

Early on Friday morning in Europe, the USD/CAD steadily climbs toward the intraday top at 1.3790. The Loonie pair does this while ignoring the negative signals coming from the options market.

However, according to the data source Reuters, the one-month risk reversal (RR) on USD/CAD, which is a measurement of the difference between call and put prices, declines for the third week in a row.

The holder of a call option has the option, but not the duty, to purchase the underlying asset on or before a certain date at a predefined price.

The right to sell is represented by a put option. It’s important to note that the weekly RR falls to -0.372 at the time of press, and that the daily options market gauge is currently on a four-day losing skid (0.187 is the most recent print).

Oct 18, 2022

VOT Research Desk

Although the momentum slows down close to the 1.3780 area, the USD/CAD pair makes a good-to-good rebound from a one and a half-week low set earlier this Tuesday. During the early North American session, spot prices fell below the 1.3700 level and are still at the mercy of the US dollar’s price movements.

The robust follow-through surge in the equity markets, which reflects the prevailing risk-on attitude, does not help the safe-haven dollar to benefit from its small intraday gains.

This therefore operates as a headwind for the USD/CAD pair, albeit a number of considerations call for prudence from bearish traders before setting themselves up for further losses. The possibility of a more pronounced tightening of monetary policy by the Fed may continue to bolster the dollar; therefore traders should exercise care when making wagers against the USD/CAD pair. In fact, the market’s current pricing suggests that there is a nearly 100% possibility that the Fed will raise rates by 75 basis points for the fourth time in a row in November.

Crude oil prices are also affected by concerns that a worsening of the global economic crisis may reduce demand for gasoline.

This may weaken the commodity-linked loonie and further help keep the decline in the USD/CAD pair to a minimum. Therefore, it will be wise to hold off on certifying that spot prices have peaked until there is significant follow-through selling. The statistics on industrial production and the capacity utilization rate are currently the main sources of inspiration for market players.

The demand for USD will be fueled by this, US bond rates, and the general risk mood. Although Wednesday’s Canadian consumer inflation data will continue to be the major focus, traders will continue to draw clues from the fluctuations of the oil price.