North America returns from its long weekend with the risk switch very much in the “on” position – equities are generally in the green and commodity prices, gold remains a stand out with the market well through the $1000 level this morning, are firmer. G-20 policy makers reiterated over the weekend that past policy mistakes in response to credit crunch type scenarios would not be repeated – stimulus was lavishly provided early in the crisis, avoiding mistake number one, and to avoid mistake number two (removing stimulus too early), the G20 stressed that significant support for the global economy would be needed for some time to come. These comments have helped lift risk appetite at the start of the week and may herald a period of slightly more dynamic, trending price action, now that the last of the major (northern hemisphere) summer holidays have passed. The CAD has benefited from commodity price gains, the broader pressure on the USD and the pro-growth G-20 policy bias to push under support on the 1.0780/20 area; we remain of the view that the recent (August) sideways movement represents a major bear consolidation. A clear break under the above-noted support zone should prompt a move to new cycle lows in funds; we think spot is heading for 1.05 in the short term and we continue to target 1.00 by year-end. This week’s BoC policy meeting may prompt some caution in the CAD; the BoC will keep policy settings on hold, we think, but given the renewed firming in the currency, the risk of a stronger dose of verbal intervention is high. From an intraday point of view, we think that modest USD/CAD gains are a sell and while we would err against running long CAD through the Thursday’s policy meeting itself, any modest sell off in the CAD resulting from harsher currency comments in the statement should provide an opportunity to short funds again.
|
Linear Mode
