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Canadian Dollar Looking Undervalued vs USD, Markets Chop as Volumes Dwindle

Canadian Dollar Looking Undervalued vs USD, Markets Chop as Volumes Dwindle

Justin McQueen, Strategist

CAD Analysis and News

  • Directionless trade amid low volumes and lack of narratives
  • CAD Looking Undervalued vs USD

Volatility Drifts Lower Ahead of Festive Period

As volumes continue to dwindle and vol heading lower ahead of the festive break, this is one of those weeks where you should not read too much into market moves. Therefore, perhaps take this time to reflect on your performance over the past year and look to identify any patterns. For example, are you more successful during a particular time in the trading session or trading a certain asset. These lookback periods in your performance are easier to analyse using a trading journal and below is a template of a trading journal.

Trading Journal: What it is and How to Create One

TRADING JOURNAL TEMPLATE

Canadian Dollar Looking Undervalued vs USD, Markets Chop as Volumes Dwindle

Source: DailyFX

Better yet, you could also use this downtime to check out our education content to help improve your skills as a trader. But first, if you are new to trading, it might be beneficial to take part in the DNA FX Quiz to help you identify what kind of trader you are.

The DNA FX Quiz

Market Overview: CAD Looking Undervalued vs USD

As I mentioned above, volumes are drifting lower, which in turn, despite yesterday’s turnaround Tuesday, markets are somewhat directionless today and is likely to remain the case throughout the week with little in the way of narratives to trade. Be mindful, however, of risks tied to Russian/Ukraine tensions. Looking at the FX space and cross-JPY has turned a corner as bond yields pick up while equities stabilise. Elsewhere, a currency that appears to be lagging is the Canadian Dollar, which I highlighted yesterday, during the bounce back in both equities and oil prices. As such, given the upside in oil prices, alongside US/CA 5yr bond spreads moving in favour of the CAD. The Loonie looks undervalued against the greenback.

USD/CAD Inverted vs Brent Crude Oil

Canadian Dollar Looking Undervalued vs USD, Markets Chop as Volumes Dwindle

Source: Refinitiv

USD/CAD Inverted vs US/CA 5yr spreads

Canadian Dollar Looking Undervalued vs USD, Markets Chop as Volumes Dwindle

Source: Refinitiv

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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