A downside surprise in Consumer Price Index (CPI) data has triggered an epic collapse across USD pairs. The question is whether this will stick. Economists at TD Securities have some reservations about that but nonetheless think short-term price action will reflect risk sentiment.

USD/CAD will find demand on dips

“While the initial knee-jerk reaction is for risk assets to celebrate, we are cautious in extrapolating continued optimism. We are concerned that the fall period will present new risks on the geopolitical front, especially with the US midterms on the horizon.”

“It remains premature to be strategically long EUR and spot very important fundamental resistance below 1.04.”

“We expect USD/JPY to reflect a broad 130/135 range.” 

“We think USD/CAD dips will find demand as we near peak BoC hawkishness as housing dynamics worsen.”