USD/CAD: Path Of Least Resistance Is Higher For USD/CAD'; Where To Buy Dips - TD

TD Research discusses USD/CAD outlook and notes that for this week, the loonie will be closely watching US data, risk appetite and the broader trends in the dollar. 
"Given that our measure of data surprises momentum is starting to top out and the market is now revising down its views on Canadian growth, we think the path of least resistance is higher for USDCAD. Along with the green shoots of a spring bounce in the dollar, oil prices could start to turn over, removing another source of CAD support," TD argues. 
"We prefer outright long exposure in USDCAD and look for a test of the 200dma soonWe look to look to use any dips towards the figure at 1.25 to add fresh long exposure.This backdrop also favors buying into EURCAD dips, owing to the strong uptrend in the cross," TD advises. 
  • Major U.S. stock indices entered correction territory on Thursday but remain elevated relative to where they were a year ago. The sell-off was spurred by fears of higher interest rates, as the 10-year government bond yield hit a four-year high.
  • The $300 billion increase in the spending cap over two years, laid out in the federal budget deal, could add to inflationary pressures at a time when the economy is already operating at close to full capacity, pressuring yields up further.
  • This week, investors will turn their attention to hard data, with advanced January retail sales providing an indication of whether or not first-quarter growth will be affected by the residual seasonality.