It will be another quiet week for developments in Canada, but there is plenty to watch elsewhere that could drive significant moves in the key crosses. Among the main things to watch this week are oil prices, signals on US rate hikes from the FOMC and US GDP, and the preliminary estimate of Q2 GDP from the UK. Crude oil is poised to test the lows WTI at USD 46.16 and both US and UK GDP are expected to show a strong rebound from a soft Q1. Alongside a likely damp May GDP in Canada, all of those developments seem to point to more evidence of the divergence theme that has been driving two of our favourite pairs to be short CAD (USD/CAD and GBP/CAD).
“We still like being strategically long those pairs, but from a tactical trading perspective, the moves of the past month don’t leave either pair with a great risk/reward at current levels. We continue to prefer being on the sidelines for now, and wait for a 2+ big figure pullback to reenter a position. Our other core views include being short CAD against other non-commodity FX including EUR, and long CAD against AUD and NZD. EUR/CAD, in particular, is one we have been watching closely as it appears to offer some of the biggest upside in the coming months. We like buying a break higher daily close above 1.4500 or a decent dip toward 1.4100. For AUD/CAD, we are currently in the middle of the range, and still like selling rallies toward 0.9600, and a daily close below 0.9400”, says RBC Capital.
At the start of the week, none of these positions jump out as short term opportunities, but we watch closely as the above mentioned events could see us breach these key levels in the coming days.
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