TD Securities said that the US dollar could fall further as Canadian investors, one of the largest holders of US stocks, face increasing pressure to hedge against the currency pair of the Canadian dollar and the US dollar.
The TD Securities team, including Jayati Bharadwaj, Mark McCormick and Linda Cheng, wrote in a report on Friday: “The loss of the dollar’s safe-haven appeal since the start of the year has increased the need for these funds to hedge their long exposure to US assets.” A further decline in the dollar “will force Canadian investors to adjust their hedging strategies, which could put further downward pressure on the dollar.”
In the first half of 2025, the Canadian dollar has risen by more than 5% against the US dollar, marking its best start in nearly a decade. TD Securities strategists predict that the Canadian dollar will continue to appreciate. They expect it to reach 1.31 Canadian dollars against the US dollar by December, which would be the highest level since 2022 and about 4% higher than the current level of approximately 1.3665 Canadian dollars.
The TD Bank team estimates that the Canadian pension funds (some of which have explicit policies to under-hedge their U.S. assets) have a hedging ratio of about 10% to 15% for these assets. Overall, Canadian investors hold approximately $1.8 trillion in U.S. stocks. Analysts wrote that a small increase of 5% in the hedging ratio could lead to selling pressure of about $90 billion on the USD/CAD.
Analysts said, “The increase in dollar hedging and potential capital repatriation pave the way for the dollar to continue to decline in the coming quarters. In this environment, the best way to build a position is to wait for a dollar rebound before selling.”
Technical analysis:
Gold: Last Friday was another typical case of “Friday decline”. As the new week begins, the strategy for the first half of the week will continue to focus on rebounds. The intraday bull-bear dividing line is around 3290/3300. Once it is recaptured, one can start to attempt to do it based on momentum signals. For detailed positions, please consult the plugin.
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Nasdaq: Our plugin and video last Friday clearly pointed out that the price should wait for a pullback, clear out the liquidity and then catch the rebound. As shown in the chart, the price movement is almost the same as the yellow area we provided. Continue with this operation method intraday, find the nearby liquidity to clear out and then catch the long position. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg and note “666” in the message.
Crude oil: It has remained within a narrow range over the past 24 hours and has not triggered our buy conditions. It is advisable to wait for a clear signal of a momentum breakthrough within the day before placing a limit order to buy at a lower price. For detailed positions, please consult the plugin.
(Crude oil 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Today’s key economic data and events to focus on:
14:00 UK Q1 GDP Final Reading (yoy)
20:00 Germany’s preliminary consumer price index for June
21:00 Atlanta Fed President Bostic will speak on the U.S. economic outlook.
21:45 US Chicago PMI for June
