​VBCE Weekly Foreign Exchange Wrap Up for Jan. 1 – Jan. 6, 2017

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

The CAD was the best performing currency this week assisted by positive risk sentiment in global equity markets. Oil prices continued to hold near 18 month highs since last month's OPEC deal to cut production. Last month, USDCAD surged in the 2nd half from 1.3080 up to 1.3600 after the U.S. Fed raised its key rate and indicated the possibility of another 3 rate hikes in 2017. However, since testing 1.36 on Dec. 28th, USDCAD has been trending lower, nearing a 1 month low of 1.3177 on Friday. Canada surprised the markets with jobs gains well above expectations. Also, Canada posted its first trade surplus in more than 2 years. Despite solid U.S. economic data and Fed rate hike expectations still in place, the USD has underperformed during the first week of 2017.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3439

1.3177

1.3439

1.3235

EURCAD

1.4137

1.3878

1.4157

1.3941

GBPCAD

1.6582

1.6597

1.6236

1.6267

JPYCAD

0.01149

0.01131

0.01151

0.01132

AUDCAD

0.9681

0.9751

0.9611

0.9655

Themes for the week:

*The CAD was the best performing currency in week 1 of 2017 after it was the best performing currency in 2016 (along with the JPY)

*EUR and JPY declines continue – holding near 18 month / 1year lows respectively

*Oil flat in a $52.18 - $55.21 range – continues to hold near 18 month highs

*Canada posts first trade surplus in 2 years: $0.53 billion (exp -$1.60 billion / prev -$1.02 billion)

*Canada net employment change: 53,700 (exp -5,000 / prev 10,700) *81,300 full time job gains - best in 5 years

*U.S. non-farm payrolls: 156,000 (exp 178,000 / prev 204,000)

On Tap for Next week:


Friday, Jan. 13: U.S. Fed Chair Yellen speech

U.S. core PPI m/m: exp 0.1% / prev 0.4% y/y: exp 1.5% / prev 1.6%

U.S. core retail sales: exp 0.5% / prev 0.2%

The CAD will most likely consolidate its gains from last week in the absence of any key data. Despite the strong employment and trade reports on Friday, the CAD gave up the majority of its gains during the balance of Friday's session. The USD uptrend is widely expected to resume as all major Canadian banks are forecasting higher USDCAD rates for 2017 from 1.34 to 1.45.

Topside targets to consider: 1.3280, 1.3320, 1.3460, 1.3600

Downside targets to consider: 1.3210, 1.3175, 1.3115, 1.3010

USDCAD 2017 Forecast (Canadian Banks) as of Dec. 2, 2016

Bank

2017 Q1

2017 Q2

2017 Q3

2017 Q4

HSBC

1.40

1.45

1.45

1.45

TD Canada Trust

1.34

1.34

1.34

1.34

National Bank

1.38

1.40

1.39

1.37

RBC

1.35

1.38

1.38

1.38

CIBC

1.39

1.37

1.36

1.37

BMO

1.3560

1.3680

1.3810

1.3740

Scotia Bank

1.38

1.40

1.38

1.36

2016 CAD Summary

2016 Summary

2016 Open

Low

High

2016 Close

USDCAD

1.3840

1.2460

1.4692

1.3429

EURCAD

1.5040

1.3820

1.6106

1.4134

GBPCAD

2.0471

1.5726

2.0925

1.6550

JPYCAD

0.01149

0.01125

0.01335

0.01150

AUDCAD

1.0085

0.9326

1.0398

0.9691

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

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Disclaimer


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.