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CAD Outperforms After Various Factors Move In Favour

CANADA
  • USDCAD is holding the day’s sharp decline that saw a low of 1.3437 before hovering just under 1.345 after clearing two support levels including 1.3485 (May 23 low).
  • Various factors have been favourable for CAD today, with the S&P e-mini climbing 1%, WTI +3.6% and sizeable GoC underperformance to Tsys with 2YY -2bps vs -7bps (leaving Can-US spread of -14bps).
  • Further, whilst both are currently seen as outside bets, OIS pricing sees next week’s BOC decision as a 1/3 odds of a 25bp hike vs 1/4 for the FOMC in two weeks.
  • Depending on changes in positioning in the admittedly long interim period, if CFTC net shorts blowing back out to -30.5% of OI back as of May 23 is broadly indicative, today's further move after yesterday's decline from 1.365 could have come with a squeezing some of these CAD shorts.
  • Next support is seen at 1.3404 (May 16 low) seen after CAD CPI beat expectations although there is heavy cumulative option expiry at 1.3580 ($644m)- 1.3600 ($834m) - 1.3615 ($736m) for tomorrow's NY cut post payrolls.

Source: Bloomberg

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