Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was mixed this week losing ground vs. the USD and GBP while gaining
marginally vs. the EUR, JPY, and AUD. Oil prices opened the week near $49 and
dropped to $46.45 on a surprise build in oil and gas inventories before closing the week
near $47.33. USDCAD spent the majority of the week range trading between 1.2900 and
1.2950 as the markets prepared for Friday's speech by the U.S. Fed Chairman. Yellen's
opening comments that "the case for an increase in the federal funds rate has
strengthened in recent months" set in motion the most volatile day in weeks as USDCAD
tested 1.2950 from 1.2862 before falling sharply to a 1 week low of 1.2832. That move
was quickly followed by a reversal higher towards a two week high of 1.3010.
Weekly Open Low High Weekly Close
USDCAD 1.2953 1.2765 1.2973 1.2868
EURCAD 1.4461 1.4432 1.4592 1.4571
GBPCAD 1.6749 1.6612 1.6878 1.6825
JPYCAD 0.01278 0.01274 0.01288 0.01283
AUDCAD 0.9909 0.9762 0.9952 0.9816
Themes for the week:
*USDCAD up-trend breakout - breaks above 1.2935/65 resistance zone and closes week
near two week high of 1.30
*U.S. core durable goods orders: 1.5% (exp. 0.5% / prev. -0.3%)
*U.S. GDP 2nd quarter 2nd reading: 1.1% (exp. 1.1% / prev. 1.2%)
*U.S. Fed Chair Yellen and other voting members offer up hawkish commentary – Sept.
rate hike probability climbs to 38%
On Tap for Next week:
Wednesday, Aug. 31th: Canada GDP ( June): exp. 0.5% (prev. -0.6%)
Friday, Sept. 2: U.S. Non-farm payrolls: exp. 180,000 (prev. 255,000)
U.S. unemployment rate: exp. 4.8% (prev. 4.9%)
Over the past three weeks, USDCAD fell from 1.32 down to 1.2765 during which the
CAD posted a rare 9 day "win" streak. Over the past week, falling oil prices, better than
expected U.S. data, and a hawkish U.S. Fed has translated into a strong performance by
the greenback. From a technical standpoint, failures to hold below the 1.2850 and 1.2892
levels has seen USDCAD break higher and close the week near its highs (1.30). With the
U.S. poised for another round of solid jobs data next week, the market should continue to
push the USD higher in the near term. Expectation – a resumption of the uptrend with
topside targets of 1.3030, 1.2075, 1.3175, and 1.3200.
Downside targets to consider: 1.2965, 1.2892, 1.2832, 1.2790.
Sources: