VBCE Foreign Exchange Wrap Up for Jan. 20 – 24, 2020

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

The CAD was relatively unphased by falling oil prices and risk aversion from the coronavirus reports early in the week. USDCAD climbed from 1.3042 up to 1.3094 before falling to 1.3036 ahead of Wednesday's Bank of Canada interest rate decision. The surprisingly dovish tone within the Bank of Canada policy statement forced the CAD lower across the board. USDCAD climbed to a 1 month high of 1.3172 before a broad recovery Thursday and Friday led the pairing back down to 1.3118. The BOC press conference was less dovish than the BOC statement implied. Also, Canadian retail sales data was not as bad as initially feared and showed a marked improvement from October. USDCAD finished the week near 1.3140/50 as equity markets and oil prices soured during Friday's North American session. Overall, the CAD, EUR, and AUD were the worst performing currencies this week. The EURO actually gained to a 3 week high just after the European Central Bank interest rate announcement on Thursday only to fall back towards 3 year lows. The deposit rate in the Eurozone remains at -0.50% and there was no indication on a move back towards positive interest rates. The coronavirus is threatening to dent China's economic growth this quarter and the AUD has suffered due to its close economic ties. The AUD initially gained on a strong employment report but quickly reversed course finishing the week as the worst performing currency. Risk aversion flows most evident during Friday's NA session led the JPY higher towards a 1 month high. The USD also broadly gained. The USD index (DXY) climbed to a 2 month high after having started 2020 near 6 month lows.

Weekly Open



Weekly Close


























Key Events:

*USDCAD climbs towards 1 month highs

*EURCAD climbs to 3 week high before falling back towards 3 year low

*GBPCAD climbs from 2 month lows towards 5 week high

*JPYCAD climbs from 13 month lows towards 1 month high

*AUDCAD steady near 10 year lows

*Crude oil (WTI) plunges 10% to 3 month low (range $53.90 - $59.65)

*USD index (DXY) climbs towards 2 month high (range 97.39 – 97.92)

*U.S. 10 yr Treasuries decline towards 4 month lows: range 1.67% to 1.82%

*China interest rate decision: 4.15% prev 4.15%

*Japan industrial production y/y: -8.2% exp -8.1% prev -8.1%

*Bank of Japan interest rate: -0.1% exp -0.1% prev -0.1%

*UK unemployment rate: 3.8% exp 3.8% prev 3.8%

*Eurozone ZEW survey – economic sentiment: 25.6 exp 5.5 / prev 11.2

*Germany ZEW survey – economic sentiment: 26.7 exp 15 / prev 10.7

*Canada manufacturing sales: -0.6% exp -0.3% / prev -0.2%

*Canada CPI m/m: 0% exp 0.1% prev -0.1% y/y: 2.2% exp 2.2% prev 2.2%

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



*Australia employment change: 28,900 exp 15,000 prev 38,500

*Australia unemployment rate: 5.1% exp 5.2% prev 5.2%

*European Central Bank interest rate decision: 0% exp 0% prev 0%


*EIA crude oil stocks change: -0.405 million barrels exp -1.009m prev -2.549 m

*Germany Markit manufacturing PMI: 45.2 exp 44.5 / prev 43.7

*Eurozone Markit manufacturing PMI: 47.8 exp 46.8 / prev 46.3

*UK Markit manufacturing PMI: 49.8 exp 48.9 prev 47.5

*Canada retail sales: 0.9% exp 0.4% prev -1.1% ex autos: 0.2% exp 0.4% prev -0.4%

*U.S. Markit manufacturing PMI: 51.7 exp 52.5 prev 52.4

On Tap for next week:

Mon Jan. 27: Germany IFO Business Climate: exp 95.6 prev 96.3

U.S. new homes sales: exp 0.721 million prev 0.719 million

Tue Jan. 28: U.S. durable goods orders: exp 0.5% prev -2.1%

U.S. non-defense capital goods orders ex aircraft: exp 0.2% prev 0.1%

Wed Jan. 29: Australia CPI Q4 y/y: exp 2.1% prev 1.7%

U.S. Fed interest rate decision: exp 1.75% prev 1.75%

Thur Jan. 30: Germany unemployment change: exp -11,000 prev 8,000

Germany unemployment rate: exp 5% prev 5%

Eurozone unemployment rate: exp 7.5% prev 7.5%

Bank of England interest rate: exp 0.75% prev 0.75%

U.S. GDP Q4 annualized: exp 2.1% prev 2.1%

U.S. GDP price index: exp 1.9% prev 1.7%

Friday Jan. 31: Brexit deadline

China NBS manufacturing PMI: exp 50.1 prev 50.2

Eurozone CPI y/y: exp 1.3% prev 1.3%

Eurozone GDP Q4 y/y: exp 1.1% prev 1.2%

Canada GDP m/m (Nov): exp 0.1% prev -0.1%

Technically, USDCAD is neutral / bullish. The pairing broke above recent resistance noted at 1.3080 after Wednesday's BOC statement. After gaining to 1.3154 Wednesday afternoon, gains were limited to just 1.3172 on Thursday before a move lower stalled at 1.3118 on Friday. There is noted resistance near 1.3180 that had contained USDCAD rallies during the second half of December. Although the BOC statement came as a surprise, BOC Governor Poloz suggests that the weaker than expected Q4 slowdown could be attributed to temporary factors and that he expects a rebound in growth this quarter. If there is a sustained break above 1.3180, upper targets include 1.3230 and 1.3270. Should the 1.3180 level hold, the January low of 1.2958 is a likely target. USDCAD may likely continue to range trade as it has done much of over the past 6 months between 1.30 – 1.33.

Topside targets to consider: 1.3170, 1.3230, 1.3270, 1.3320

Downside targets to consider: 1.3120, 1.3080, 1.3030, 1.2960

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


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