VBCE Foreign Exchange Wrap Up for Nov. 4 – Nov. 15, 2019

Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca

The CAD was mixed these past two weeks with gains vs. the EUR & AUD and losses vs. the USD & GBP. Overall, trading ranges were fairly narrow with markets still tracking progress with regards to a U.S. / China trade deal. There were initial reports that both sides agreed to roll back tariffs upon completion of phase 1 of a deal. There were also reports that trade talks had broken down. Equity markets were generally unphased with the varying reports and trended higher for the most part. White House Economic Advisor Kudlow propelled risk trades further with positive trade comments late Thursday. The TSX hit the 17,000 mark while the DJIA hit 28,000 – both historical highs. Confidence of an imminent trade deal also saw the CNYUSD rate trade below 7.00 for the first time in 3 months. The U.S. 10 year yield also climbed to a 3 month high at 1.95%. Oil prices also benefited from the positive market sentiment gaining 4% to the $58 level. There were OPEC reports on the probability of deeper production cuts. The OPEC secretary commented on steep supply cuts within the U.S. shale industry along with an upswing in oil demand for 2020. USDCAD generally held between 1.3114 – 1.3199 before climbing above 1.3200 on Friday, Nov. 8th after the Canadian jobs data. Headline data missed estimates with a loss of 1,800 jobs in October after having added 53,700 in September. The unemployment rate held at 5.5% - near 50 year lows while wage inflation climbed to 4.36%. USDCAD has held above 1.3200 this past week with a gradual climb to 1.3272 followed by a decline to 1.3215 on Friday. The USD saw declines late in the week after U.S. Fed Powell's speech. U.S. retail sales data was mixed while industrial production data was much weaker than expected. The USD index declined from 1 month highs towards a 1 week low while 10 year yields dropped from 3 month highs towards a 2 week low.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3140

1.3115

1.3272

1.3218

EURCAD

1.4674

1.4544

1.4694

1.4605

GBPCAD

1.6987

1.6850

1.7096

1.7057

JPYCAD

0.01213

0.01203

0.01225

0.01214

AUDCAD

0.9087

0.8974

0.9111

0.9003

Key Events for the week:

*USDCAD climbs towards 5 week highs before easing back towards a 1 week low

*EURCAD falls from 2 month highs towards a 2 week low / EURUSD falls from 11 week highs to 1 month lows

*GBPCAD and GBPUSD climb to 6 month highs

*JPYCAD climbs from 6 month lows towards 1 month highs / JPYUSD falls from 3 week highs towards 5 month low

*AUDCAD falls from 3 month highs towards 2 week low / AUDUSD falls from 3 month highs towards 1 month lows

*Crude oil (WTI) climbs to 7 week highs (range $55.91 - $58.16)

*USD index climbs from 15 week low to 1 month high (range 97.15 – 98.45)

*U.S. 10 yr Treasuries climb to 3m high before falling to 2wk low range 1.80% to 1.95%

*Australia retail sales: exp 0.2% / prev 0.4%

*Germany Markit manufacturing PMI: exp 41.9 / prev 41.9

*Eurozone Markit manufacturing PMI: exp 45.7 / prev 45.7

*China Caixin services PMI: exp 52.8 / prev 51.3

*Australia interest rate decision: exp / prev 0.75%

*U.S. trade balance: exp -$55.5 billion / prev -$54.9 billion

*Canada int'l merchandise trade: exp / prev -$0.96 billion

*U.S. ISM non-manufacturing index: exp 53.2 / prev 52.6

*Eurozone retail sales y/y: exp 1.5% / prev 2.1%

*Canada Ivey PMI: exp 54.4 / prev 48.7

*Germany industrial production m/m: exp -0.1% / prev 0.3%

*Bank of England interest rate decision: exp 0.75% / prev 0.75%

*China exports y/y: exp -3.9% / prev -3.2%

*China trade balance: exp $40.83 billion / prev $39.65 billion

*Canada net employment change: exp 15,900 / prev 53,700

*Canada unemployment rate: exp 5.5% / prev 5.5%

*Canada average hourly wages y/y: prev 4.25%

*UK manufacturing production m/m: -0.4% (exp -0.3% / prev -0.7%)

*UK GDP Q3 qoq: 0.3% (exp 0.4% / prev -0.2%) y/y: 1% (exp 1.1% / prev 1.3%)

*UK ILO unemployment rate: 3.8% (exp 3.9% / prev 3.9%)

*UK average earnings ex bonus: 3.6% (exp 3.8% / prev 3.8%)

*Eurozone ZEW survey – economic sentiment: -1 (exp -32.5 / prev -23.5)

*Germany ZEW survey – economic sentiment: -2.1 (exp -13 / prev -22.8)

*New Zealand central bank interest rate: 1% (exp 0.75% / prev 1%)

*Germany CPI y/y harmonized: 0.9% (exp 0.9% / prev 0.9%)

* UK CPI y/y: 1.5% (exp 1.6% / prev 1.7%) Core: 1.7% (exp 1.7% / prev 1.7%)

*Eurozone industrial production m/m: 0.1% (exp -0.3% / prev 0.4%)

*U.S. CPI m/m: 0.4% (exp 0.3% / prev 0%) y/y: 1.8% (exp 1.7% / prev 1.7%)

*U.S. CPIex food&energy m/m0.2%(exp 0.2%/prev 0.1%)y/y2.3%(exp 2.4%/prev 2.4%)

*Japan GDP Q3 qoq: 0.1% (exp 0.2%/prev 0.4%) annualized:0.2% (exp 0.8%/prev 1.8%)

*Australia employment change: -19,000 (exp 15,000 / prev 12,500)

*Australia unemployment rate: 5.3% (exp 5.3% / prev 5.2%)

*China industrial production y/y: 4.7% (exp 5.4% / prev 5.8%)

*China retail sales y/y: 7.2% (exp 7.9% / prev 7.8%)

*Germany GDP Q3 qoq: 0.1% (exp -0.1% / prev -0.2%) y/y: 1% (0.9% / prev -0.1%)

*UK retail sales y/y: 3.1% (exp 3.7% / prev 3.1%)

*Eurozone GDP Q3 qoq: 0.2% (exp 0.2% / prev 0.2%) y/y: 1.2% (exp 1.1% / prev 1.1%)

*U.S. producer price index m/m0.4%(exp 0.3%prev -0.3%)y/y1.1%(exp 0.9%prev 1.4%)

*U.S. PPI ex food&energy m: 0.3% (exp 0.2%/prev -0.3%)y/y: 1.6% (exp 1.5%/prev2%)

*EIA crude oil stocks change: 2.219 million barrels (exp 1.649m / prev 7.929m)

*Japan industrial production y/y: 1.3% (exp 1.1% / prev 1.1%)

*Eurozone CPI core y/y: 1.1% (exp 1.1% / prev 1.1%)

*Eurozone trade balance: €18.3 (exp €19.4 / prev €19.7)

*U.S. retail sales m/m: 0.3%(exp 0.2%/prev -0.3%) ex autos: 0.2%(exp 0.4%/prev -0.1%)

U.S. retail sales control group: 0.3% (exp 0.3% / prev -0.1%)

U.S. industrial production m/m: -0.8% (exp -0.4% / prev -0.3%)

On Tap for This week:

Tue Nov 19: Canada manufacturing shipments: exp -0.6% / prev 0.8%

U.S. housing starts: exp 1.32 million / prev 1.256 million

Japan exports: exp -7.6% / prev -5.2%

Wed Nov 20: China central bank interest rate decision: exp 4.2% / prev 4.2%

Canada CPI m/m: exp 0.3% / prev -0.4% y/y: exp 1.9% / prev 1.9%

Bank of Canada CPI m/m: exp 0.3% / prev 0% y/y: exp 1.9% / prev 1.9%

EIA crude oil stocks change: prev 2.219 million barrels

U.S. FOMC minutes

Thur Nov 21: Canada ADP employment change: exp 53,300 / prev 28,200

Japan national CPI y/y: exp 0.3% / prev 0.2%

Fri Nov. 22: Germany Markit manufacturing PMI: exp 42.9 / prev 42.1

Eurozone Markit manufacturing PMI: exp 46.4 / prev 45.9

Canada retail sales m/m: exp -0.1% / prev -0.1% ex autos: exp 0.1% / prev -0.2%

U.S. Markit manufacturing PMI: exp 51.5 / prev 51.3

U.S. Markit services PMI: exp 51.0 / prev 50.6

Technically, USDCAD is neutral/bullish. USDCAD has been climbing the past 3 weeks after stalling near 1.3050 in late October. A five week high was reached on Thursday @ 1.3272 – the fifth consecutive day of gains although net gains on the week have been less than 35 basis points. The uptrend appears to be losing momentum as resistance in the 1.3240 – 1.3270 area has held. USDCAD closes the week down on the session and near the weekly low @ 1.3210. A sustained move below 1.3210 should see a re-test of the 1.3130 support level while a sustained move above 1.3270 will likely lead to a move back towards 1.3300.

Topside targets to consider: 1.3250, 1.3270, 1.3300, 1.3340

Downside targets to consider: 1.3210, 1.3160,1.3130, 1.3050

Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada.S. Federal Reserve, CNBC, Forexlive, CME Group

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