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USD/CAD: Pair Jumps Higher on Commodity Rout, Ignores EURUSD Strength
The whole industrial or agricultural commodity sector was plummeting on Monday, which was weighing on commodity-linked currencies such as the CAD, NZD and AUD. Oil prices were down more than 2%, with WTI dipping below the $40 handle and widening losses in a cascade sell-off.
The USD/CAD remained bid and the pair ignored a total retreat of dollar bulls on the EUR/USD and USD/JPY. The first one was testing the $1.15 handle and 1% higher on Monday, while the latter was seen rapidly dropping toward the ¥120 handle. Nevertheless, the USD/CAD was trading elevated, adding 0.5% to C$1.3240 and was seen at fresh 11-year highs.
"Commodity-related currencies have been hit hardest as commodity prices have fallen to their lowest level since 1999 according to Bloomberg’s commodity price index. The main beneficiaries in the foreign exchange market from the more intense phase of risk aversion overnight have been the euro and yen who are deriving support from the forced liquidation of short positions built up over the last year," analysts at Bank of Tokyo-Mitsubishi wrote on Monday.
An analytic team at Barclays expect the Chinese yuan to weaken around 8% against the US dollar over the next two years. As a result, they expect more troubles for stocks as well as for emerging currencies, which both have been badly hit since the People’s Bank of China’s, the country's central bank, decision to devalue the yuan. This would also negatively hit commodities and currencies like the CAD, which have been suffering since the first wave of devaluation.
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USD/CAD: Loonie Gains with Oil Prices
The USD/CAD cross gained during Tuesday session as oil rebounded, with WTI up more than 2%.
The Loonie was trading up 0.84% at C$1.3173 in Tuesday, following corrective moves on oil prices from Monday's steep drop.
"Commodity-related currencies have been battered the hardest as commodity prices have fallen to their lowest level since 1999 according to Bloomberg’s commodity price index. The main beneficiaries in the foreign exchange market from the more intense phase of risk aversion overnight have been the euro and yen who are deriving support from the forced liquidation of short positions built up over the last year," analysts at Bank of Tokyo-Mitsubishi wrote on Monday.
Analysts at Barclays expect the Chinese Renminbi to weaken around 8% against the US dollar over the next two years. Hence expectations are that equities will likely suffer, as well as emerging currencies, which have both been badly hammered since the People’s Bank of China depreciated the yuan. Ultimately this has an adverse affect on commodities and currencies such as CAD, which is weathering badly since the first wave of devaluation.
On Friday, Canadian inflation figures for July came out within expectations, while retail sales for June were positive, but investors shunned these figures, as the focus remains mainly on commodity prices and the risk-off trading that forces investors out of riskier assets, this being evident on stocks on Monday. However, Asian bourses have rallied in overnight trading, showing signs that appetite for riskier assets have returned slightly.
As there are no news in the economic calendar, market movers will be guided by whether risk appetite returns and so expectations of high volatility are on the cards.
source
USD/CAD pulls further away from 11-year peak
The U.S. dollar was lower against its Canadian counterpart on Wednesday, pulling away from the previous session's 11-year peak as investors continued to monitor developments in China.
USD/CAD hit 1.3252 during early U.S. trade, the session low; the pair subsequently consolidated at 1.3294, sliding 0.32%.
The pair was likely to find support at 1.3143, Tuesday's low and resistance at 1.3355, Tuesday's high and an 11-year high.
The greenback was boosted after the People’s Bank of China cut interest rates by 25 basis points to 4.6% on Tuesday, in a bid to bolster economic growth after a plunge in the country’s stock market.
However, concerns over whether a free fall in China’s stocks will make the world’s second-largest economy weaker persisted. Shares in Shanghai opened higher on Wednesday, before ending down 1.3% in a volatile session.
Recent steep declines in Chinese equity markets have sparked fears that they will hasten an economic downturn and undermined investor confidence in the government’s ability to revitalize economic growth.
The turmoil in markets began when China unexpectedly devalued the yuan on August 11, sparking fears over the condition of the economy.
Markets shrugged off a report by the U.S. Commerce Department on Wednesday showing that total durable goods orders increased by 2.0% last month, compared to expectations for a decline of 0.4%.
Core durable goods orders, which exclude volatile transportation items, inched up 0.6%, topping forecasts for an increase of 0.4%.
The loonie was sharply higher against the euro, with EUR/CAD plummeting 1.59% to 1.5121.
USD/CAD forecast for the week of August 31, 2015
The USD/CAD pair initially tried to rally during the course of the week, but pullback to form a bit of a shooting star. Simultaneously, the oil markets rallied rather significantly at the end of the week. Because of this, this market may very well pullback. We are not looking for any type of break down though, because there is a significant support barrier between the 1.30 level and the 1.28 level below there. It is not until we get below all of that that we would consider selling. Supportive candles between here and there could be used as entries.
Canada Q2 current account balance -17.4B vs -16.9B expected
Canada Q2 current account balance:
USD/CAD Technical Situation: Outlook Remains Bullish, Look for Buying Dips
The pair refuses to come down from multi-year highs, which suggest bulls are still very active in buying dips and in defending the overall bullish trend. The latest mini correction took the pair to the horizontal support area around C$1.3170, where previous highs are located. Moreover, the pair is now testing the first bullish trend line from August 12 lows.
The second, much stronger, bullish trend line from July 30 lows is currently very close to the spot levels at around C$1.3085. If any significant dip is going to happen after the Canadian GDP later in the session, this area should offer enough support for the pair and is expected to hold. The four-hour chart suggests the pair is near oversold levels, although conditions are not extreme yet, so one more leg lower is possible. The MACD has turned negative, but the last couple of times it only made a false signal. The RSI is in the middle zone, not helping at all.
Therefore, the daily outlook is to buy on dips to the C$1.3080 area, targeting today's high of C$1.3230. On the other hand, if no decline happens today, the pair should confirm the bullish bias by clearing out C$1.3230 and target last week's high of C$1.3340.
The shorter time span is unclear and messy as the pair has been moving sideways for the last couple of days. Technical oscillators are therefore not very helpful, but the Stochastics is in deeply oversold territory and suggest a possible upside movement is likely. From the solely intraday perspective, bulls should be more active, as the risk-off sentiment is observed on currency markets.
Traders should wait for dips to buy, but intraday resistances are seen at $C1.3230 and C$1.33. On the other hand, if the support at C$1.3170 cracks, decline should stop at C$1.3085 where bulls should re-enter the market at better prices.
The medium and longer-term trends are strictly bullish, with no major corrections during the previous weeks, which confirms the strength of the current trend.
source
Canada Q2 GDP -0.5% vs -1.0% expected
The first reading on Canadian Q2 GDP:
Quick drop in USD/CAD.
USD/CAD: Greenback & Loonie Await Labor Data
The USD/CAD pair was seen slightly elevated on Friday, ahead of the highly anticipated US non-farm payrolls data (NFP). The release is even more important this time around as it is likely to provide a hint to the Federal Reserve's (Fed) rate hike intentions.
"Interest rate markets are currently pricing in a 30% probability of a September hike in interest rates from the Federal Reserve, 42% for October and 57% for December," Chris Weston from IG wrote on Friday.
The next meeting of the Federal Open Market Committee is scheduled for September 16 and 17.
Moreover, labor data from Canada is also due at the same time.
The USD/CAD currency pair was seen 0.40% higher and trading at C$1.3231.
Expectations point to 217,000 new jobs in the US economy in August, following 215,000 in July, while the unemployment rate predicted to fall to 5.2% from 5.3%. The market will also watch the average hourly earnings data.
Canada’s economy is expected to lose 5,000 positions in August, while the unemployment rate is expected to remain untouched at 6.8%, according to analysts’ consensus.
source
USD/CAD forecast for the week of September 7, 2015
The USD/CAD pair continues to go back and forth, forming a neutral candle for the week. Because of this, we feel that the market is simply going to hang about in this general vicinity. We feel that there is more than enough support below at the 1.30 level to keep the market afloat, so therefore we have no interest in selling. However, we do not have a signal to start buying yet so we are simply sitting on the sidelines as far as longer-term trades are concerned. Short-term we continue to buy pullbacks.
USD/CAD Forecast Sep. 7-11
USD/CAD had difficulty finding its feet last week, and ended the week with modest gains. The pair closed the week at 1.3280. There are only 4 events this week, highlighted by Building Permits. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
In the US, employment numbers were mixed, which only complicates things for the Fed, as it mulls over a rate hike. Over in Canada, GDP beat expectations and Employment Change looked sharp.
* All times are GMT.
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