USDCAD news - page 17
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Canada's Industrial Prices Rise on Energy, Raw Materials Unchanged in June
Canadian industrial product prices advanced on more expensive energy and autos, while raw materials were flat, as losses outweighed all the gains in June.
Canada's Industrial Product Price Index (IPPI) climbed 0.5% during the sixth month of the year, Statistics Canada said on Tuesday. The freshly released figure beat market expectations of a 0.4% advance.
The top contributors to higher IPPI were rising prices for energy and petroleum products, up 2%, mainly led by motor gasoline. Excluding energy, the index increased 0.4%.
Another central monthly gain came out of the motorized and recreational vehicles component, with both passenger cars and light trucks leading the way. Higher auto prices were largely due to the depreciation of the Canadian dollar versus the US peer, as some items are always reported in US dollars.
From May to June the so-called loonie fell 1.5% against the greenback, the data agency noted. If the exchange rate effect was taken out of the calculations, then the IPPI would have advanced only 0.2%.
Meat, fish and dairy price tags also increased, while non-ferrous metal products fell the most since September 2014.
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USD/CAD: Trading the Canadian GDP
Canadian GDP is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the Canadian dollar.
Here are all the details, and 5 possible outcomes for USD/CAD.
Published on Friday at 12:30 GMT.
Indicator Background
The Canadian GDP is released monthly, unlike most other developed countries which post GDP on a quarterly basis. The key indicator provides an excellent indication of the health and direction of the economy. Traders should pay particular attention to Canadian GDP, as an unexpected reading can quickly affect the movement of USD/CAD.
GDP has struggled, posting three declines in the past four readings. The April reading came in at -0.1%, short of the estimate of +0.1%. The estimate for the June report stands at a flat 0.0%. If GDP contracts again in the upcoming release, we could see the loonie lose ground.
Sentiments and levels
The wobbly Canadian dollar has not recovered since the BOC surprised with a rate cut earlier in July. In the US, meanwhile, there is a strong expectation that the Fed will raise rates shortly, perhaps as early as September. So, the overall sentiment is bullish on USD/CAD towards this release.
Technical levels, from top to bottom: 1.3346, 1.3165, 1.3063, 1.2924, 1.2798 and 1.2673.
5 Scenarios
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USD/CAD: GDP Strength Could Target 11-Year High
While it’s typically the marquee event for any given week (if not the whole month), yesterday’s FOMC monetary policy statement was a bit of a dud (see FOMC Instant Reaction). The central bank made only small tweaks to its monetary policy statement, careful not to tip the scales in the increasingly important “September-vs.-December” debate over liftoff for interest rates. The dollar saw a bit of a recovery after the report, but all in all, traders expecting substantial volatility were disappointed yesterday.
Thankfully, market participants also had today’s Q2 US Advance GDP estimate to look forward to, and as it turns out, that report was far more instructive on the US economy’s performance than the typically-opaque FOMC statement. US GDP rose at a 2.3% annualized rate in the second quarter, slightly below the 2.5% reading expected, but just about every other aspect of the report was better than anticipated. Q2 GDP was powered by the consumer, with personal consumption rising at 2.9%, better than the 2.7% growth rate expected. The strong reading in this more sustainable growth source shows strength underneath the surface of the headline number. Most importantly, the Q1 GDP estimate was revised sharply higher, from -0.2% annualized up to +0.8%, showing that the Q1 slowdown was not nearly as bad as many economists feared. The simultaneous initial weekly jobless claims report was also generally solid, printing at 267k after last week’s historically low 255k reading.
Of course, all US economic reports are immediately filtered through the lens of Fed policy and though today’s GDP reading is unlikely to lead to a dramatic shift in interest rate expectations, it lends a bit of support to the hawks. Looking ahead, next week’s NFP report will absolutely essential, with traders looking for 250k jobs and an uptick in average hourly earnings to help bolster the case for a September rate hike.
Pair to Watch: USD/CAD
For its part, USD/CAD briefly set an 11-year high above 1.3060 on Friday, but bulls opted to book profits at that level, leading to a pullback to the 20-day MA around 1.2860 yesterday. From there, buyers stepped back in to support the pair, creating a clear Bullish Pin Candle*, or hammer formation, on the daily chart; for the uninitiated, this pattern shows an intraday shift from selling to buying pressure and is often seen at near-term bottoms in the market. While the lagging MACD indicator has started to roll over, it is still well above the “0” level and the RSI has also pulled back from overbought territory, potentially clearing the way for another leg higher.
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USD/CAD: Loonie Attacked by Oil Bears, US Dollar Pressure
Driven by a drop in oil prices, the loonie fell again, dragged down also by a strengthening US dollar, as traders focus on September as a meeting with the first rate-hike possibility.
The USD/CAD currency pair was seen trading 0.31% higher at C$1.3035, only 70 pips from the highest level since September 2004 as the loonie suffers from the current commodity markets selloff.
The US dollar is providing an unsustainable drag on the Canadian currency as policymakers in their last meeting on Wednesday confirmed their trust in the US labor market, now expecting only a slight improvement to be enough for initiation of a tightening cycle.
The general belief is still related to September, boosting the US currency against most of its major counterparts, as well as against dollar-backed commodities.
Moreover, oil prices provide a drag on the loonie's performance as the oil-producing country suffers from lower prices and the impact on national GDP data was visible.
Oil prices have been hurt recently by the nuclear pact with Iran, opening the door to exports from this fourth largest global oil producer to add to already elevated global oil supply. Such a change prompted bears on the market to be active again and oil prices to fall again to their lows.
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May 2015 Canada GDP -0.2% vs 0.0% exp m/m
Details of the May 2015 Canada GDP data report 31 July 2015
USD/CAD forecast for the week of August 3, 2015
The USD/CAD pair fell during the majority of the week, but as you can see on the chart, we have drawn a red line at the 1.28 handle, which is the area we broke out above recently. That should now be the bottom of support, and of course the 1.30 level is a large, round, psychologically significant number that should be supportive as well. We look at this as a supportive “zone” in this market, and as a result we think that the buyers will come back into pushes market higher given enough time.
At this point in time, if we can break above the top of the hammer, we are buyers as the longer-term move higher should continue. After all, you have to keep in mind that the 1.30 level was where the markets stopped cold during the financial crisis a couple of years ago. With that, it’s only a matter time before the buyers step into this market and push things much higher.
On top of all that, you have to keep in mind that the crude oil markets are looking horrible at the moment, and that will continue to work against the value of the Canadian dollar in general, and as a result should provide bullish pressure in this marketplace as well. We believe that the market is going to very quickly become a “buy-and-hold” type of situation, as well as “buy on the dips.”
The Canadians recently had a surprise interest-rate cut, and that of course is what finally push this pair above this area. You have to wonder whether or not the Bank of Canada recognize that this was a technically significant barrier that could be pushed above due to that move. But that’s case, clearly the bank of Canada wants to see this pair go much higher. The Federal Reserve is expected to raise rates sometime later this year, so this market is simply moving incongruence with that thought process, as the US dollar continues to be one of the most favored currencies that we follow.
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USD/CAD Forecast Aug. 3-7
The Canadian dollar posted minor losses last week, as USD/CAD slightly below the 1.31 line. There are only five events this week, but all are major indicators. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The Canadian dollar weakened late in the week following a disappointing GDP reading of -0.2%, its fourth decline in the past five readings. In the US, the Federal Reserve remained cautious but did acknowledge improvement in the US economy. Advance GDP rebounded with a gain of 2.6% in Q2, but this fell short of the estimate.
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June 2015 Canada trade balance -0.48bn vs -2.80bn exp
June 2015 Canada trade balance 05 August 2015
USD/CAD forecast for the week of August 7, 2015
The USD/CAD pair went back and forth during the course of the week, testing the 1.30 level for support. Ultimately, we feel that this market still has plenty of buying pressure underneath it anyways, because of the hammer that formed from the previous week, and the fact that we have broken out of a significant resistance barrier in the form of the 1.30 level that has long-term ramifications. On top of that, the oil markets are simply too soft to give any real strength to the Canadian dollar, so therefore we are buyers on a break out above the top of the range for the week or pullbacks and show signs of support.
USD/CAD: Loonie Picks Up as Oil Prices Recover
The USD/CAD pair fell back to the C$1.30 level, retreating from near eleven-year highs, as crude oil prices climbed.
The so-called loonie advanced 0.53% to C$1.3064 against the greenback after hitting the intraday high at C$1.3053 earlier in the session.
The trading session was fairly quiet with no major domestic releases scheduled for Monday, following Friday’s upbeat American employment report.
Crude oil prices saw an uptick, with WTI futures rising 1.72% trading at $44.62 per barrel and Brent futures increasing 2.55% $49.85 per barrel.
The recent loonie pickup was preceded by drastic losses, with economists pointing to a general drop in oil prices, a stronger US dollar and concerns about the upcoming Canadian election.
"Even with the best trade figures of the year in Canada, a 14.8% spike in building permits, a small July jobs gain, record auto sales, and yet new records for home sales last month, the currency still fell to a fresh 11-year low this week … That puts this year on pace for the second biggest annual decline in the currency on record (exceeded only by the carnage in 2008). Note that almost half of that decline has come just since the start of July, as the currency was holding above 80 cents at mid-year," BMO Capital Markets chief economist Douglas Porter said in a research note.
"We officially call for the C$ to soften further over the next three months, hitting bottom around October, likely below the 75 cent mark (i.e. above $1.33/US$)," Porter added.
Meanwhile, fresh data from the Fed's Board showed on Monday that the Labor Market Conditions Index (LMCI) fell to 1.1 points in July from an upwardly revised 1.4 points in June, revealing moderate improvement in the US jobs market.
Moreover, Fed Governor Stanley Fischer spoke against a premature rate hike, stressing that inflation has progressed only marginally. "The interesting situation in which we are is that employment has been rising pretty fast relative to previous performance and yet inflation is very low. And the concern about the situation is not to move before we see inflation as well as employment returning to more normal levels," Governor Fischer said.
Meanwhile, Fed President Dennis Lockhart was also scheduled to speak twice on Monday. He has indicated that he supports an interest rate hike in September and that there would need to be a "significant deterioration" in economic activity to cause the Federal Reserve not to act.
Traders are also keeping an eye on Greece, as there is a chance that it may finalize negotiations on its bailout deal later this week.
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