​VBCE Weekly Foreign Exchange Wrap Up for Oct. 24 – Oct. 28, 2016

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

The CAD closed the week relatively unchanged vs. most currencies having given up minor losses to the USD and the EUR. Earlier this week, the Australian dollar was a top performer with AUDCAD reaching its highest level since April of 2014. On Friday, the USDCAD rate saw some brief trade above the 1.34 level (albeit only for a few minutes) – an 8 month high. After having fallen from 1.3314 down to 1.3010 over the past two weeks, USDCAD continued higher this week as oil price fell 5% after having traded near 15 month highs. There was no key data for Canada this week as CAD direction was largely influenced by comments from Bank of Canada governor Poloz. He confirmed last week that the Bank had examined the possibility of adding stimulus (in the form an interest rate cut) to boost economic growth citing downward growth revisions and disappointing export data. Monday afternoon, further comments were misconstrued that the Bank would refrain from cutting rates over the next 18 months – a signal that saw USDCAD plunge from 1.3396 down to 1.3278 within minutes. He later indicated that he was referring to the expectation that the output gap would take about 18 months to close – sending USDCAD back up above the 1.33 level. The USD saw some brief strength Friday morning on a fairly strong 3rd quarter GDP preliminary reading. The USD then sold off across the board on concerns that the initial reading was not that strong given the underlying personal consumption, inventory, and export details of the report.

Weekly Open



Weekly Close


























Themes for the week:

*USDCAD hits 1.3434 – 8 month high but fails to close above the 1.34 level

*AUDCAD hits 31 month high @ 1.0277

*Bank of Canada Poloz comments cause CAD volatility – after hitting 1.3396 early afternoon Monday, USDCAD plunges to 1.3278 only to bounce back to 1.3350

*Oil falls from 15 month highs – loses 5% on the week to $48.45 from $50.96

*U.S. GDP Q3 first reading: 2.9% (exp. 2.5% / prev. 1.4%) – USDCAD climbs to 1.3419 on the headline "beat" but falls to 1.3353 on some worrisome details ($12 billion inventory build vs. Q2 $9.5 billion drawdown / Exports +10% vs. prev. 1.4% - skewed by unusually large soya bean exports / personal consumption was 2.1% vs. 4.3% prior)

*FBI investigation into Hillary Clinton emails re-opened – risk aversion flows broadly weaken the USD, CAD, and MXN across the board (USDCAD briefly spikes to 1.3434 before falling back to 1.3378)

*U.S. Fed funds probability for Dec. rate hike jumps to 80% after U.S. GDP data but closes week lower at 67.5%

On Tap for Next week:

Tuesday, Nov. 1: Canada GDP (August): exp. 0.2% / prev. 0.5%

Bank of Canada Governor Poloz speech

Reserve Bank of Australia interest rate decision: unchanged @ 1.50%

Bank of Japan interest rate decision: prev. -0.10%

Wednesday, Nov. 2: U.S. Fed interest rate decision: unchanged @ 0.50%

Thursday, Nov. 3: Bank of England interest rate decision: unchanged @ 0.25%

Friday, Nov. 4: Canada employment change: exp. -10,000 / prev. 67,200

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

Canada trade balance: exp. -$1.70 billion / prev. -$1.94 billion

U.S. non-farm payrolls: exp. 175,000 / prev. 156,000

U.S. unemployment rate: exp. 4.9% / prev. 5.0%

U.S. trade balance: exp. -$38.60 billion / prev. -$40.70 billion

After last week's downside rejection at the 1.30 level (post Bank of Canada press conference) and subsequent close above the 1.3314 technical resistance level, USDCAD remained confined to a fairly tight range. There were two brief flurries above the 1.34 level on Friday but the pairing managed to close the week below a string of resistance levels dating back to early March of this year. However downside moves have been limited to the 100 day moving average this week as the USD enjoys a trend of "dip-buying". Volatility will be elevated next week as we edge closer to the Nov. 8th U.S. Federal election. There are also several central bank interest rate / monetary policy announcements and North American employment releases to drive market direction next week.

Topside targets to consider: 1.3434, 1.3450, 1.3475, 1.3500

Downside targets to consider: 1.3350, 1.3314, 1.3280, 1.3225

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.