FXStreet reports that following Friday’s release of the Canadian monthly GDP growth figures, Mazen Issa, Senior FX Strategist at TD Securities (TDS), suggests taking profits on long USDCAD trade.

“We implemented this on January 10 on the basis that the market had underappreciated the domestic slowdown in early Q4 data that implied the economy may have contracted in that period. This, we thought, would eventually force the Bank of Canada to turn dovish and cut the overnight rate by the April meeting.”

“As it turns out, the data has worsened and the BOC flipped dovish at its recent meeting where they markedly lowered their near-term projections. Today's industry-level GDP report was a touch better than expected but will not alter the need for BOC easing.”

“Going forward we think USDCAD can remain elevated near the 1.33 mark as uncertainty over the growth impact from supply chain disruptions of 2019-nCoV unfolds. This could keep risk appetite in check. Moreover, the OIS curve should sustain pricing for easing by mid-year, though the market currently expects more than a cut by year-end - which may be too grand of an expectation at this point.”

“Tactically, our FV and positioning dashboard suggest that the CAD may have run its weaker course for now. We also think we may have neared or passed peak pessimism in data surprises.”