VBCE Weekly Foreign Exchange Wrap Up for March 6 - 10, 2017

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


The USD continued higher vs most currencies before easing back during Friday's session. U.S. employment data beat expectations although the official payroll numbers fell short of Wednesday's ADP surprise beat. Overall, the data supports an interest rate hike at next Wednesday's 11:00am Fed announcement. The CAD broadly weakened before recovering Friday after another strong employment report. Canada added more than 100,000 full time jobs in February, the most in any given month since 2006. USDCAD hit 1.3535 on Thursday, the highest level since a brief stint near 1.3600 on Dec. 28th before falling to 1.3421 after the jobs report. Oil had one of its worst weeks in a year losing 10% to $48.34 after having held near $52-$54 for the past 3 months. Despite rising U.S. yields, the EUR rebounded to trade near 1 month highs vs. USD and 4 month highs vs. CAD on an optimistic / less dovish European Central Bank.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3375

1.3373

1.3535

1.3463

EURCAD

1.4205

1.4162

1.4398

1.4350

GBPCAD

1.6448

1.6324

1.6484

1.6361

JPYCAD

0.01173

0.01165

0.01181

0.01171

AUDCAD

1.0159

1.0131

1.0205

1.0147

Themes for the week:

*notable broad-based USD and EUR strength

*USDCAD tests 2017 high @ 1.3535 (52 week range: 1.2460 – 1.3600)

*Oil (WTI) sinks from $53.77 to $48.34 – down 10% to a 3 month low

*Canada trade balance: $0.81 billion (exp $0.70 billion / prev $0.45 billion)

*U.S. trade balance: -$48.5 billion (exp -$48.5 billion / prev -$44.30 billion)

*U.S. ADP employment change: 298k (exp 190k / prev 261k)

*European Central Bank interest rate decision: unchanged @ 0% - "less dovish rhetoric noted"

*Canada net employment change: 15.3k (exp 2.5k / prev 48.3k)

*Canada full time employment: 105.1k (prev 15.8k)

*Canada unemployment rate: 6.6% (exp 6.8% / prev 6.8%)

*U.S. non-farm payrolls: 235k (exp 190k / prev 238k)

*U.S. unemployment rate: 4.7% (exp 4.7% / prev 4.8%)

*U.S. Fed funds futures probability of March 15th interest rate hike = 91%

On Tap for Next week:


Wed. Mar. 15: U.S. CPI m/m: exp 0.2% / prev 0.3% y/y: exp 2.2% / prev 2.3%

U.S. retail sales: exp 0.1% / prev 0.4%

U.S. Fed interest rate decision: exp +0.25% to 1% / prev 0.75%

U.S. economic projections / Yellen speech

Technically, the bullish USD trend is strong having gained momentum on the sustained break above the 1.3200 level. There was a correction on Friday driven by the strong Canadian job gains although tumbling oil prices limited the move lower. Support at 1.3480 has now become resistance with USDCAD unable to break back above this level into the weekly close. Next week, USDCAD will be driven by several key data releases Wednesday morning and the 11:00am U.S. Fed statement, economic projections, and speech by Fed Chairman Yellen. USDCAD will likely consolidate between 1.3375 and 1.3535 before testing the 1.3600 level (Dec. 2016 high).

Topside targets to consider: 1.3480, 1.3535, 1.3600

Downside targets to consider: 1.3420, 1.3375, 1.3320, 1.3213

USDCAD 2017 Forecast (Canadian Banks) as of Mar. 2017

Bank

2017 Q1

2017 Q2

2017 Q3

2017 Q4

HSBC

1.40

1.45

1.40

1.40

TD Canada Trust

1.35

1.35

1.34

1.34

National Bank

1.35

1.40

1.39

1.37

RBC

1.35

1.38

1.38

1.38

CIBC

1.34

1.36

1.39

1.37

BMO

1.3170

1.3470

1.3550

1.3400

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

083e3d7a6b

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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.