​VBCE Weekly Foreign Exchange Wrap Up for Sept. 26 – Sept. 30, 2016

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

The CAD was under pressure early in the week with USDCAD hitting a 5 month high (1.3280) Monday evening after some dovish comments by Bank of Canada Governor Poloz. The weakness was short-lived as USDCAD dropped to 1.3164 within a few hours as markets scored a round 1 victory to Hilary Clinton in the first of three presidential debates. Volatility remained high over the next 4 days with USDCAD climbing back to 1.3280 on Tuesday before falling to 1.3048 Wednesday evening after a surprise OPEC announcement confirmed a production freeze agreement for November. The CAD gave up the bulk of its gains Thursday as global equity markets sold off sharply on fears surrounding Deutsche Bank's ability to survive a $14 billion fine. On Friday, markets reversed course yet again on reports the fine would be just $5.4 billion. Oil remained well bid, while Canadian July GDP beat expectations. The CAD rallied sharply on Friday to close the week with gains vs. USD, EUR, GBP, and JPY.

Weekly Open



Weekly Close


























Themes for the week:

*MXN, AUD, and CAD outperform while USD flat vs. EUR, GBP, and JPY

*Trump / Clinton debate – markets signal Clinton the victor - CAD and MXN soar

*Another crude oil inventory draw - surprise draws of 23.154 million barrels of crude oil from inventories over the past month vs. expectations of a build of 10.37 million barrels

*Oil prices gain 12% on the month - OPEC production freeze announcement (USDCAD dropped from 1.3270 down to 1.3048 in the hours after)

*AUDCAD rate tests 2 year high (near 1.0156)

*Deutsche Bank fine inspires market volatility – CAD gives up post-OPEC gains

*U.S. GDP Q2: 1.4% (exp. 1.3% / prev. 1.1%)

* JPYCAD tests ~ 5 year high (0.01325) Thursday on risk aversion flows

*Canadian GDP (July): 0.5% (exp. 0.3% / prev. 0.6%) – USDCAD falls from 1.3180 down to 1.3086 / CAD broadly recovers

On Tap for Next week:

Wednesday, Oct. 5: EIA crude oil inventories

Canada trade balance: (exp. -$2.60 billion / prev. -$2.49 billion)

Friday, Oct. 7th: Canada net employment change: (exp. 10,000 / prev. 26,200)

Canada unemployment rate: (exp. 7.0% / prev. 7.0%)

U.S. non-farm payrolls: (exp. 170,000 / prev. 151,000)

U.S. unemployment rate: (exp. 4.9% / prev. 4.9%)

USDCAD closed the week well off of Tuesday's 5 month high of 1.3280. Positive market sentiment returned on Friday while oil closed the week near a 1 month high. The strong July GDP data for Canada puts less pressure on the Bank of Canada to cut interest rates. Mixed U.S. data resulted in another downgrade by a leading forecaster – the Atlanta Fed sees U.S. 3rd quarter growth at just 2.4% (down from 3.6% in August). Canada saw strong full-time job gains last month (+ 52,200) and should that trend continue, USDCAD should see downward pressure next week.

Topside targets to consider: 1.3140, 1.3190, 1.3270, 1.3300

Downside targets to consider: 1.3090, 1.3030, 1.3000, 1.2950

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


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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.