I have been stalking this trade for awhile and USD/CAD appears to be breaking out to the downside.
Today copper hit the highest since late-October and is narrowly below the highest since September.
I’ll let the charts do the talking:
USD/CAD
Copper
Overlayed (USD/CAD inverted):
A break above $3.75 in US copper and a close below 1.0113 would seal the deal, technically.
Fundamentally, today the BOC altered their statement to note:
“Very favourable financing conditions are expected to buttress consumer spending and housing activity. Household expenditures are expected to remain high relative to GDP and the ratio of household debt to income is projected to rise further.
The BOC also upgraded future forecasts. On several occasions, Carney has noted that household debt as major worry. To me, this points to a very high threshold for lowering rates. If US growth continues to beat expectations the next move will be to price in rate hikes.
Add in upbeat Chinese growth and the only trade in this pair is short.
