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FXstreet.com (Barcelona) - The loonie is set to appreciate further against the greenback according to research from TD Securities. TD's research team bases this forecast on the fact that the BoC is one of the only central banks moving in a hawkish direction. The interest rate differential helped the cross break the 1.0000 - 0.9850 range it had been trading on for the previous three months. The Canadian dollar has been amognst the top performers since the last announcement from the BoC. TD securities considers that this new break beyond 0.9850 will open up a new support at 0.9700. Furthermore, the report says that "key domestic data releases - namely CPI and retail sales - have not been particularly stellar, but have been decent enough to sustain the steady march forward in rate hike expectations. Indeed, market pricing has gradually edged towards our updated forecast for an autumn rate hike. The OIS market now indicates nearly a full 25bps hike is now fully priced in for the September meeting and a good deal of money has been placed this week on the risk of a July move."

TD Securities warns that given the sharp appreciation of the loonie in the last weeks, there might be a pullback. Moreover, commodities, which usually are key drivers of the loonie, have not been rising enough to sustain such an appreciation. There are also the threats coming from new tensions in Europe. Nevertheless, TD securities believes that these facts could pull back the Canadian dollar for a while but that in the long run it will appreciate. TD Securities sees the cross reaching parity and 0.99 in Q3 and Q4 2012, respectively, and setting at 0.98 for the first two quarters of 2013.

The pair is currently trading at 0.9837, down by 0.05%.

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