USDCAD news - page 38
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USD/CAD: Loonie Drops to Daily Lows as Oil Turns Red
The Canadian dollar failed to hold gains and dropped to daily lows around C$1.2930 ahead of the US session, as oil prompted some weakness in the loonie.
Oil was down 0.49% on Thursday, with WTI trading around $46.54 ahead of the US session. More importantly, oil has fallen around 5% this week, which failed to cause any significant losses on the loonie, therefore the correlation between these two assets is not as strong this week.
The US calendar will offer durable goods orders for July. A big improvement is forecast, which might support the greenback slightly. Moreover, jobless claims will be released, followed by the services PMI for August, which should accelerate to 52.0 points.
More importantly, the Jackson Hole Symposium starts today and investors will focus on every piece of information coming from there, so volatility might be elevated.
Finally, Federal Reserve (Fed) Chair Janet Yellen is due to deliver a speech titled "The Federal Reserve's Monetary Policy Toolkit" at the symposium. This will most likely be the major driver and might set the direction for markets.
The pair is hovering around the 100-day moving average, which is at $1.3660. The trend is neutral and it would appear that the greenback might retreat in the next hours, despite falling oil. The support is C$1.29 and if broken, further losses toward C$1.28 are likely.
The resistance is still at C$1.30 and while below, the medium-term trend is bearish.
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USD/CAD forecast for the week of August 29, 2016
At this point in time, it looks as if the US dollars trying to make its final stand against the Canadian dollar. We have had a slightly positive week, and it appears that there is interest somewhere just below the 1.30 level. If we can break above there, I feel that this pair can go much higher but it’s also going to have to get a little bit of help from the oil markets. Remember, as oil goes lower, this pair tends to go higher and vice versa.
Canada Nanos weekly economic mood index 59.3 vs 59.9 prior
The Nanos Economic Mood Index
Canadian Q2 current account balance -$19.86 vs -$20.20B
Canadian second quarter current account balance
Canadian current account has never recovered since the crisis.
The Bank of Canada forecast a jump in non-commodity exports to pick up the slack for the decline in commodities. That clearly hasn't been the case.USD/CAD Extends Rally On Weaker Oil And Stronger Dollar
USD/CAD pushed higher for a third consecutive session after stabilizing above the 1.3000 handle on Monday. The push higher on the last day of the month has served to put the pair back in the green for August. The pair gained as the US Dollar gained, while oil prices fell to fresh lows for the week.
The US Dollar has been the strongest currency on Tuesday, posting gains against all of its major counterparts. The US Dollar index (DXY) moved into positive territory for the month on Monday but was seen pulling back from highs to close below the 61.8% Fibonacci retracement measured from August 5 highs. The index continued to push higher on Tuesday and was last seen scaling resistance at 95.97. The level reflects May highs on a daily chart, and a daily close above it would serve to keep the Dollar bullish in the near-term.
Oil prices continued lower for a second consecutive day. WTI crude oil prices (USOIL) were seen breaking to fresh lows for the week after the North American open. A succession of lower lows and lower highs is now seen from the August 21 highs, suggesting that a broader decline may be taking place in the instrument. USOIL was last consolidating near prior lows at $46.60 for a decline of 1.13% on the day.
Data out of Canada reported today showed the current account deficit widening to C$19.9bn coming in ahead of the expected C$20.5bn. The data marked the third consecutive widening in the current account. The raw materials price index was reported to decline 2.7% against an expected decline of 1.3%, the industrial product price index rose 0.2% against an expected fall of 0.1%. The data failed to move the exchange rate. Out of the United States, the Conference Board report an increase in consumer confidence. The figure rose to 101.1 against an expected 97.2, USD/CAD traded at fresh highs during the release, and continued higher following the data.
Wednesday’s data stands to have a strong impact on the currency pair. ADP non-farm figures will be released out of the United States with an expected increase of 173,000 employed people, and prior reading of 179,000 people. GDP figures are expected to be released from Canada, the monthly figure is forecasted to show a growth of 0.5% with a prior reading showing a decline of 0.6%. The annual number is expected to decline 1.5% with the prior reading showing growth at 2.4%.
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USD/CAD: Pair Hovers Around C$1.31 Ahead of Canada GDP
The USD/CAD pair was consolidating after yesterday's jump and was seen trading around C$1.31 during the London dealing, flattish on the day.
Canadian GDP data are due later in the session. The monthly change for June is expected to improve from -0.6% to 0.5%, but on the other hand, the more important quarterly change for the second quarter is projected to drop sharply to -1.4% from 2.4%. The year-on-year change should tick higher to 1.1% from 1.0% previously.
Oil also slipped on Wednesday and therefore the loonie's potential seems limited. WTI oil was seen dropping toward the $46 level during the London session.
From the US dollar perspective, the ADP employment change for August is projected to print 175,000, down from 179,000 in July. Finally, the Chicago PMI for August will be released, along with pending home sales for July.
"The US dollar is still deriving support from the more hawkish signal from the Fed that it is moving closer to resuming rate hikes, although upward momentum has been limited so far by the market’s scepticism that the Fed will hike rates as early as next month. Stronger economic data releases will be required in the interim to convince the market that a September rate hike is more likely with the Fed stressing that the timing of the next rate hike remains data dependent," analysts at Bank of Tokyo-Mitsubishi said on Wednesday.
The pair jumped through two strong resistances. One was at the psychological level of C$1.30, where previous lows were seen. The second resistance was around C$1.3070, where the strong bearish trend line was located.
As long as the pair trades above these, the outlook is bullish, targeting previous highs around C$1.3190.
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Canada Q2 GDP (annualized) -1.6% vs -1.5% expected
June GDP
Be careful with the headline here. The year-over-year number was better and there was some upward momentum in June, which may be seen as a good sign of growth carrying over into July and Q3.
Generally, there's enough good and bad to balance out here but it is still the worst quarter since the financial crisis.
In the first half of the year, the Canadian economy grew at just under a 0.5% annualized pace. That's poor, no doubt but it's already priced in.
USD/CAD forecast for the week of September 5, 2016
The USD/CAD pair initially tried to rally during the course of the week but as you can see struggled at the uptrend line that had previously held the market higher. By doing so, the market found it to sell resistant, that we did up forming a shooting star. The 1.30 level below that level was of course support, but having said that it looks as if the market is ready to drop from here but we also have a hammer from 2 weeks previously, so at this point I think really get short-term choppiness and therefore longer-term trades will be difficult to deal with this particular market.
USD/CAD Weekly Outlook September 5-September 9
The recent advance in USD/CAD appears to have run its course, given the sharp move lower in the pair on Friday. USD/CAD ended the session at 1.2987, down 0.82% for the day and essentially unchanged for the week overall, as the late-week sell-off erased the gains posted Monday through Wednesday. The slide in USD/CAD occurred despite a recovery in the U.S. dollar after an initial sell-off following the release of a weaker than expected August U.S. nonfarm payroll report. The report showed an increase of 151K jobs, weaker than the estimate for a rise of 180K. The resilience in the U.S. dollar on Friday, as it posted a quarter of a percentage gain, failed to translate to strength in USD/CAD, as CAD was hit by a rise in oil prices, which were boosted by renewed talks of a production freeze.
Oil prices have been the main driver of USD/CAD, which fell throughout the first half of August as oil advanced on talk that a deal would be made to freeze production as early as this month. However, that rally has not been sustained, as oil has dropped sharply, falling 6.7% last week, as Iran has indicated it is not willing to participate in a deal. However, volatility could remain an issue for oil prices, as the contract bounced back 3% on Friday, and a push by Vladimir Putin for a deal could help support prices going forward. In an interview with Bloomberg, Putin expressed his desire for OPEC and Russia to freeze supplies.
A recovery from the recent slide in oil would be an ongoing negative for USD/CAD. In addition to movements in oil, a big driver in the coming week will be the Bank of Canada’s rate decision on Wednesday at 10:00am EST. The consensus is for rates to be left on hold, so the focus will be on guidance. Consumer spending and the labor market have weakened since the last BoC meeting, so guidance could include more talk about easing.
As a result of the decline in USD/CAD on Friday, the pair has left behind a failed test of a falling resistance line dating from the late-July peak, suggesting a follow through sell-off to the rising trendline dating back to early June is possible. This trendline currently stands at the 1.28 level. Ahead of this level, the 20-day moving average/38.2% Fibonacci retracement of the advance from the August low is now being tested. The next lower support is at the 100-day moving average at 1.2938, not far below a 50% retracement of the August rally (1.2955). A decline below these levels would increase the probabilities of a drop to the aforementioned rising trendline shown on the daily chart, a move that would bring the 100-week moving average into play, a moving average that has provided support in recent weeks and has remained intact since early 2013. Thus, its implications for the longer term technical outlook for USD/CAD are significant.
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BoC To Stay The Course; USD/CAD Dips A Buying Opportunity
Q2 GDP fell by 1.6% QoQ, confirming a significant slowdown in growth even after accounting for the impact of the Fort McMurray wildfire. Without the updated macroeconomic projections we believe the BoC will largely stay the course at the September meeting.
There should be some acknowledgement of an even Q2 GDP result than the central bank had been expecting but the BoC will wait until the October monetary policy report before considering any changes to the forward guidance or changing its assessment that the “overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate”.
Going forward the BoC’s margin for error is quite small in our view. With potential growth of about 1.5% it will take a GDP expansion of well above 3% during the second half of the year to make any meaningful impact on reducing the output gap. This means that BoC may need to change its message in October if incoming data disappoints.
Nearterm volatility in USD/CAD is still mainly driven by external factors and with crude likely to remain under USD50/bl we continue to see dips in USD/CAD below 1.30 as buying opportunities.
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