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The Maple Leaf Extended Its Summer Vacation


The CAD continued to trade in narrow ranges despite political issues . This is a forex signal  of the broader FX markets, which shown  volatility that constantly declined  after the initial Fed quantitative easing  tapering concerns during the second quarter. Forex signals for the CAD from which analysts saw idiosyncratic risks that include  a disarray of  correction in the Canadian housing market and a change at the Bank of Canada, have not improved. The Bank of Canada has been efficient in securing the continuity of its statements after Mark Carney left and the  coming of Stephen Poloz.

In Depth CAD Analysis

BNP Paribas analysed the CAD forex signals utilising its internal FX valuation model.  According to the broker, the USD/CAD continued to trade in line with its key economic drivers over the past three months. Their model also indicated to some variations in the CAD’s sensitivity to financial markets variables.  USD/CAD’s strong relation to the equity markets have weakened lately. However, the broker believes that its sensitivity to the relative USD/CAD  strong correlation to USD/CAD yield curve increased.  Consequently, they noted that a steepening in the US yield curve that tended to push USD/CAD higher. This pressured the recent vulnerability of the commodity/EM currency bloc to volatility in the longer end of the US yield curve driven by Fed Quantitative Easing tapering expectations.

CAD Short Positions

The FX positioning for the CAD  has been stable. BNP Paribas positioning analysis painted a picture of a short position between minus 20 and minus 35, out of a minus 50 to plus 50 range, throughout 2013.  CAD short positioning has diverged from the Australian dollar and New Zealand dollar  where the prior  accumulation in short positions  has been unwinding more quickly.


A slow tapering of the Fed implied that investors require to be choosy on USD outlook. Forex signals for this case sees a strong  USD being much firmer versus the core G10 currencies than any other commodity bloc. More forex signals for the CAD point to growth spillovers. USDCAD tending to converge to the 1.0200-1.0400 range. On a relative basis, the CAD should strengthen against the JPY and CHF once US fiscal uncertainty fades, but mainly as a function of USD strength against both of these funding currencies.

Domestic Demand

There are no forex signals that identify Canadian domestic events to be converted as catalyst for CAD. The domestic data as a function of market’s reaction has fallen in 2013. It therefore reflected forex signals of  “static” Bank of Canada policy outlook.  Hence, BNP Paribas had expected few reasons for it to change. The slow output growth , level of employment and inflation point to a sustained Bank of Canada policy for quite a while. There are visible forex signals  of delayed risks while analysts have reported of Bank of Canada having to raise rates in late 2014. Initially, First, the ‘great rotation’ from domestic demand weakened by the consumer deleveraging to exports may fail to materialize to the extent that the Bank of Canada expects. This are forex signals that the output gap may end later than what the Bank of Canada had expected, which delays the period of rate hikes. Secondly, Canadian housing market is still undergoing risks to the economic outlook while household debts are climbing despite a sluggish pace.


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