VBCE Weekly Foreign Exchange Wrap Up for April 3 -7, 2017

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

USDCAD started the week near 1.3320 and broke out of its neutral 1.3260 – 1.3400 range that had been in place for the 2nd half of March. The pairing tested the 1.3450 level on a few occasions while managing to close above the 1.34 level for 4 straight days. Despite, higher oil prices (oil gained 6% on the week from Tuesday's low of $49.91), the CAD showed a tendency to be sold on rallies. The initial move above 1.34 happened Tuesday and the fact that Canada reported its first trade deficit in 3 months while the January surplus was halved kept the CAD under pressure for the next few days. Friday saw Canada beat job expectations (a common trend these past few months) and combined with a 3% surge in oil prices, USDCAD dropped from 1.3422 down to 1.3340. The move lower could not be sustained as the market looked through the weaker U.S. jobs headline data noting the underlying details were fairly solid. USDCAD would bounce back up towards 1.3420 and close the week above the 1.34 level.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3321

1.3305

1.3456

1.3402

EURCAD

1.4193

1.4180

1.4355

1.4190

GBPCAD

1.6710

1.6552

1.6793

1.6573

JPYCAD

0.01196

0.01190

0.01219

0.01205

AUDCAD

1.0165

1.0029

1.0200

1.0050

Themes for the week:

*USDCAD breakout – closes above 1.3400 for 4 consecutive sessions (Tues-Fri)

*Oil bounces trends higher / spikes 3% Fri in reaction to Syria Airstrikes ($49.91 - $52.91)

*Australian Central Bank interest rate: unchanged @ 1.50% / dovish rhetoric – AUDCAD slide continues (down 3 cents over past two weeks from 4 month highs @ 1.0330 to two month lows @ 1.0029)

*Canada trade balance: -$0.97 billion (exp $0.50 billion / prev $0.42 billion *revised lower from $0.81 billion)

*U.S. trade balance: -43.60 billion (exp -$44.8 billion / prev -$48.2 billion)

*U.S. ADP employment change: 263,000 (exp 187,000 / prev 245,000)

*Canada net employment change: 19,400 (exp 5,000 / prev 15,300)

*Canada unemployment rate: 6.7% (exp 6.7% / prev 6.6%)

U.S. non-farm payrolls: 98,000 (exp 180,000 / prev 219,000)

U.S. unemployment rate: 4.5% (exp 4.7% / prev 4.7%)

On Tap for Next week:


Wed Apr. 12: Bank of Canada interest rate: exp unchanged @ 0.50%

Technically, USDCAD appears to be trading with a neutral / slightly bullish bias as the pairing managed to sustain a break above the 1.3400 level. Gains to 1.3455 were however marginal at best while a downside test failed to hold and we close the week back above the 1.34 level. The support zone appears to have risen from 1.3275/1.3320 towards the 1.3340/70 levels. With the Bank of Canada meeting next Wednesday, the CAD should continue to see selling interest on any CAD rally. The Bank of Canada continues to "look through" recent economic data (which has exceeded market expectations in many cases) and higher oil prices to highlight downside risks to the Canadian economy and maintain its stance on closing the output gap in 2018. A sustained break below the 1.33 level / above the 1.3455 level will be needed for a change in technical bias.

Topside targets to consider: 1.3420, 1.3455, 1.3480, 1.3535

Downside targets to consider: 1.3370, 1.3340, 1.3300, 1.3280

USDCAD 2017 Forecast (Canadian Banks) Mar. 2017

Bank

2017 Q2

2017 Q3

2017 Q4

HSBC

1.40

1.35

1.35

TD Canada Trust

1.37

1.36

1.35

National Bank

1.40

1.39

1.37

RBC

1.38

1.38

1.38

CIBC

1.35

1.36

1.34

BMO

1.3470

1.3550

1.3400

Scotia Bank

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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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.