VBCE Weekly Foreign Exchange Wrap Up for Aug. 29 – Sept. 2, 2016
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was under pressure for most of the week before enjoying a stellar performance on Friday. A combination of the bullish USD trend carried over from last week along with a 9% fall in oil prices saw USDCAD trade to 1.3148, its highest level in about 3 weeks. The GBP was actually the best performing currency gaining 2 cents vs. the USD / 3.5 cents vs. the CAD to trade at its highest post Brexit level (since late June). The markets appeared confident of a possible Sept.U.S. Fed rate hike until Friday's jobs data missed the mark. The USD sold off vs. most currencies with USDCAD falling from 1.3114 down to a weekly low of 1.2983.
| Weekly Open | Low | High | Weekly Close | |
| USDCAD | 1.3007 | 1.2983 | 1.3148 | 1.2988 |
| EURCAD | 1.4562 | 1.4483 | 1.4683 | 1.4490 |
| GBPCAD | 1.7088 | 1.7010 | 1.7455 | 1.7267 |
| JPYCAD | 0.01277 | 0.01248 | 0.01278 | 0.01248 |
| AUDCAD | 0.9849 | 0.9802 | 0.9920 | 0.9830 |
Themes for the week:
*USDCAD climbs from 1.3007 up to 1.3148 (three week high) before falling to close week near 1.2983 (1 week low)
*Canada GDP (June): 0.6% (exp. 0.4% / prev. -0.6%) – USDCAD climbs towards 3 week high
*U.S. Non-farm payrolls: 151,000 (exp. 180,000 / prev. 275,000)
*U.S. unemployment rate: 4.9% (exp. 4.8% / prev. 4.9%) – results mixed as USD strengthens vs. EUR and JPY but loses vs. CAD, GBP, AUD
*Oil prices fall 9% ($47.35 - $43.19) before 3% rally to close week near $44.35
On Tap for Next week:
Wednesday, Sept. 7: Bank of Canada interest rate / monetary policy announcement
Friday, Sept. 9: Canada net employment change (Aug): exp. 18,000 (prev. -31,200)
Canada unemployment rate: exp. 6.9% (prev. 6.9%)
USDCAD failed to break above the 1.3150 level on two tries but managed to close above the 1.2965 level. A break above this level last week helped accelerate the gains noted this week. On Wednesday, the Bank of Canada statement will be closely watched. The July 13th statement was more hawkish noting an anticipated 2nd half rebound in the Canadian economy. On that day, USDCAD plunged from 1.3081 down to 1.2936. However Canadian jobs data is due out on Friday and back on Aug. 5th, extremely poor data sent USDCAD from 1.3009 up to 1.3200. The trend does not look good with full-time losses of 71,400 jobs in July and 40,100 in June. Expect USDCAD to retain a neutral to slightly bullish bias in the week ahead with topside targets of 1.3048, 1.3148, 1.3200, 1.3250
Downside targets to consider: 1.2965, 1.2892, 1.2832, 1.2790.
Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada, U.S. Federal Reserve, CNBC, Forexlive
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The information and opinions contained herein are gathered from sources which are thought to be reliable but the reader should not assume that the information and opinions are official or final. VBCE makes no warranty concerning the accuracy of the information and opinions, and accepts no liability for the consequences of any actions taken on the basis of the information and opinions provided. The content is for general information only and does not constitute in anyway giving financial advice.
