Societe Generale’s Kenneth Broux highlights that the Canadian Dollar has recovered to its strongest level in two months, with USD/CAD mean‑reverting to 1.3933 from 1.4248.
The pair now trades close to fair value on 2‑year spread models, and a test of 1.3900 would mark a 50% retracement of the May–June rally, helped by stronger WTI and reduced speculative shorts
Fair value nears as rally retraces “In Canada, building permits will play second fiddle to US CPI as the loonie recovers to the strongest level in two months.” “USD/CAD has mean reverted to 1.3933 from 1.4248 in late June and trades close to fair value based on 2y bond spreads (Rsq 0.8).” “A test of 1.3900 would mark a 50% retracement of the May-June rally.” “The loonie has been supported by the rebound in WTI above $82/b, the elimination of speculative short positions and the dovish repricing of the Fed post NFP.” “Long CAD/short JPY (+0.63%) is the best carry performer in G10 so far in August.” Author