VBCE Foreign Exchange Wrap Up for Nov. 18 – Nov. 29, 2019

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

The CAD was little changed over the past two weeks. During the week of Nov. 18th – 22nd, USDCAD initially climbed from 1.3225 up to 1.3328 only to fall back to 1.3254. U.S. – China trade headlines continued to influence market moves with some concerns on the progress of a trade deal after the U.S. openly supported Hong Kong protesters. Most global equity indices suffered losses before positive trade rhetoric saw equity markets reverse course and climb to new historical highs. China's chief negotiator was "cautiously optimistic" about a phase-one trade deal while U.S. President Trump claimed that Phase-One of the trade deal was nearly complete. Central Bank policy was also a notable driver. After failing to sustain trade below 1.3200 on Tuesday, Nov. 19th, USDCAD pushed higher to 1.3273 after dovish comments from Bank of Canada Deputy Governor Wilkins. The uptrend continued the next day with a move to 1.3328 after the U.S. Fed minutes confirmed a likely pause in interest rate cuts. The U.S. Fed has already cut its key interest rate three times this year and now sits just below the Bank of Canada which currently maintains the highest interest rate within the G7. After a pull-back to 1.3295, USDCAD climbed to 1.3326 on Nov. 21 before falling back to 1.3270 after Bank of Canada Governor Poloz commented that "Canada's monetary conditions are about right given the current economic situation that is being challenged by global trade tensions." Canadian retail sales data out Friday were slightly better than expected sending USDCAD down to 1.3254 before a wave of broad-based USD strength saw USDCAD finish the week just under 1.3300. During the week of Nov. 25 – 29, USDCAD held an uneventful 1.3268 – 1.3319 range despite broad-based USD strength taking the USD index up to a 6 week high. Month-end flows saw the index fall back towards 1 week lows while oil prices which had held near 2 month hjghs in recent sessions plunged 5% towards 1 month lows. The CAD was unphased finishing the week with a 25 bp gain over the USD. During Friday's session, USDCAD initially climbed from 1.3280 up to 1.3315 ahead of the Canadian GDP data. Better than expected data along with broad-based USD weakness saw USDCAD decline to 1.3272 – close to a 1week low.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3225

1.3190

1.3328

1.3275

EURCAD

1.4615

1.4587

1.4770

1.4625

GBPCAD

1.7085

1.7021

1.7270

1.7170

JPYCAD

0.01215

0.01211

0.01230

0.01212

AUDCAD

0.9010

0.8965

0.9070

0.8975

Key Events for the week:

*USDCAD climbs to 6 week highs before falling towards 2 week lows

*EURCAD climbs to 3 month highs before falling to 2 week low

*EURUSD falls from 2 week highs towards 7 week lows

*GBPCAD and GBPUSD climb to 6 month highs before falling to 2 week lows

*JPYCAD climbs to 6 week highs before falling to 3 week lows

*JPYUSD falls from 2 week highs towards 6 month low

*AUDCAD holds near 1 month lows / AUDUSD holds near 6 week lows

*Crude oil (WTI) falls from 2 month highs to 1 month lows (range $55.07 - $58.77)

*USD index climbs to 6 week high before falling to 1 week low (range 97.68 – 98.54)

*U.S. 10 yr Treasuries climb from 1 month lows to 2 week high: range 1.73% to 1.79%

*Canada manufacturing shipments: -0.2% (exp -0.6% / prev 0.8%)

*Bank of Canada Wilkins speech: https://www.bankofcanada.ca/2019/11/financial-stability-uncertain-world/

*U.S. housing starts: 1.314 million (exp 1.32 million / prev 1.266 million)

*Japan exports: -9.2% (exp -7.6% / prev -5.2%)

*China central bank interest rate decision: 4.15% (exp 4.2% / prev 4.2%)

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

*Bank of Canada CPI m/m: 0.4% (exp 0.3% / prev 0%) y/y: 1.9% (exp 1.9% / prev 1.9%)

*U.S. FOMC minutes: https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20191030.pdf

*Canada ADP employment change: -22,600 (exp 53,300 / prev 28,200)

*Bank of Canada Poloz speech: "Canada's monetary conditions are about right given the current economic situation that is being challenged by global trade tensions."

*Japan national CPI y/y: 0.2% (exp 0.3% / prev 0.2%)

*Germany Markit manufacturing PMI: 43.8 (exp 42.9 / prev 42.1)

*Eurozone Markit manufacturing PMI: 46.6 (exp 46.4 / prev 45.9)

*Canada retail sales m/m: -0.1% (exp -0.1% / prev -0.1%)

*Canada retail sales ex autos: 0.2% (exp 0.1% / prev -0.2%)

*U.S. Markit manufacturing PMI: 52.2 (exp 51.5 / prev 51.3)

*U.S. Markit services PMI: 51.6 (exp 51.0 / prev 50.6)

*Germany IFO – current assessment: 97.9 (exp 97.9 / prev 97.8)

*Canada wholesale sales: 1% (exp 0.4% / prev -1.2%)

*U.S. Fed Powell speech: https://www.federalreserve.gov/newsevents/speech/powell20191125a.htm

* U.S. durable goods orders: 0.6% (exp -0.8% / prev -1.4%)

*U.S. GDP Q3 annualized: 2.1% (exp 1.9% / prev 1.9%)

*U.S. GDP price index Q3: 1.7% (exp 1.7% / prev 1.6%)

*Japan retail trade y/y: -7.1% (exp -4.4% / prev 9.2%)

*Germany CPI harmonized y/y: 1.2% (exp 1.2% / prev 0.9%)

*Japan Tokyo CPI ex fresh food: 0.6% (exp 0.6% / prev 0.5%)

*Japan unemployment rate: 2.4% (exp 2.4% / prev 2.4%)

*Japan industrial production y/y: -7.4% (exp 1.9% / prev 1.3%)

*Germany retail sales m/m: -1.9% (exp 0% / prev 0%)

*Germany unemployment rate: 5% (exp 5% / prev 5%)

*Eurozone CPI core y/y: 1.3% (exp 1.2% / prev 1.1%)

*Eurozone unemployment rate: 7.5% (exp 7.5% / prev 7.6%)

*Canada GDP (Sept): 0.1% (exp 0.1% / prev 0.1%)

*Canada GDP Q3 annualized: 1.3% (exp 1.2% / prev 3.5%)

On Tap for This week:

Mon Dec 2: China Caixin manufacturing PMI: exp 51.4 prev 51.7

Germany Markit manufacturing PMI: exp 43.8 prev 43.8

Eurozone Markit manufacturing PMI: exp 45.7 prev 46.6

UK Markit manufacturing PMI: exp 48.1 prev 48.3

Canada Markit manufacturing PMI: exp 52.6 prev 51.2

U.S. Markit manufacturing PMI: exp 52.2 prev 52.2

U.S. ISM manufacturing PMI: exp 49.4 prev 48.3

Tue Dec 3: Australia central bank interest rate decision: exp 0.75% prev 0.75%

Wed Dec 4: Australia GDP Q3 qoq: exp 0.5% prev 0.5%

China Caixin services PMI: exp 52.7 prev 51.1

U.S. ADP employment change: exp 138,000 prev 125,000

U.S. ISM non-manufacturing PMI: exp 54.5 prev 54.7

Bank of Canada interest rate: exp 1.75% prev 1.75%

Thur Dec 5: Eurozone retail sales: exp 2.0% prev 3.1%

Eurozone GDP Q3 y/y: exp 1.2% prev 1.2%

U.S. Trade balance: exp -$51.5 billion prev -$52.5 billion

Canada Int'l merchandise trade: exp -$0.70 billion prev -$0.98 billion

Canada Ivey PMI: exp 53.8 prev 48.2

Fri Dec 6: Germany industrial production m/m: exp 0.2% prev -0.6%

OPEC Meeting

Canada net employment change: exp 15,900 prev -1,800
Canada unemployment rate: exp 5.6% prev 5.5%

Canada average hourly wages y/y: prev 4.36%

U.S. non-farm payrolls: exp 183,000 prev 128,000

U.S. unemployment rate: exp 3.6% prev 3.6%

U.S. average hourly earnings y/y: exp 3% prev 3%

Technically, USDCAD is neutral. USDCAD has been holding a narrow range since initially climbing from 1.3190 up to 1.3328. The pairing has yet to challenge the October high of 1.3340 or the September high of 1.3380. USDCAD continues to struggle above the 1.3300 level with a series of lower "highs" these past two weeks. However, downside moves have also stalled near 1.3255 – 1.3270. A sustained move above 1.3328 should see a re-test of the 1.3340 – 1.3380 range while a sustained move below 1.3250 will likely lead to a move back into the 1.3160 – 1.3210 range.

Topside targets to consider: 1.3315, 1.3328, 1.3340, 1.3380, 1.3430

Downside targets to consider: 1.3255, 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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