VBCE Weekly Foreign Exchange Wrap Up for April 17-21, 2017

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

USDCAD opened the week near 1 month lows and briefly dipped to 1.3261 on the back of broad-based USD weakness after the surprise UK election call sparked a massive rally in the GBP. GBPCAD gained 6 cents on the week – reaching its highest level since Sept. 2016. The CAD was the worst performing currency over the final 4 days as oil prices tumbled 7% and Friday's Canadian inflation data was softer than expected. USDCAD climbed from 1.3261 up to 1.3525 between Tuesday and Friday – closing the week just under the 1.35 level. The sharp move all but erases the move lower last week following the Bank of Canada's monetary policy announcement and Trump's commentary on the USD being "too strong". Equity markets were relatively flat as markets prepared for Sunday's election in France.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3313

1.3261

1.3525

1.3495

EURCAD

1.4125

1.4120

1.4533

1.4460

GBPCAD

1.6690

1.6680

1.7341

1.7280

JPYCAD

0.01229

0.01220

0.01241

0.01236

AUDCAD

1.0091

1.0057

1.0173

1.0173

Themes for the week:

*USDCAD tests 1.3520/25 – just shy of March 2017 high (1.3530/35) but closes week just below 1.35 level

*Oil breaks recent trend – declines 7% from $53.21 down to $49.50 – a 1 month low

*UK Prime Minister May calls snap election (June 8th) – GBPCAD rallies from 1.6733 up to 1.7285 within hours

*U.S. industrial production: 0.5% exo 0.5% / prev 0.1%

*Canada CPI m/m: -0.3% (exp 0.1% / prev 0.1%) y/y: 2.4% (exp 2.6% / prev 2.7%)

*Canada CPI common: 1.3% /prev 1.3% median: 1.7% /prev 1.8% Trim 1.4% /prev1.6%

On Tap for Next week:


Wed Apr. 26: Canada retail sales: exp -0.1% / prev 2.2% core: -0.3% / prev 1.7%

Thur Apr. 27: ECB interest rate decision: exp unchanged @ 0% / prev 0%

U.S. durable goods orders: exp 1.2% / prev 1.8% core: exp 0.4% / prev 0.5%

Fri Apr 28: Canada GDP (Feb): exp 0.1% / prev 0.6%

U.S. GDP Q1: exp 1.1% / prev 2.1%

Technically, USDCAD is trending higher after a sustained break above the 1.3425-55 resistance zone. Given the low Canadian inflation data and sharp drop in oil prices this week, it is a bit concerning that the March high of 1.3535 was not challenged and that the pairing closed the week just below the 1.35 level.

Topside targets to consider: 1.3525, 1.3535, 1.3575, 1.3600

Downside targets to consider: 1.3460, 1.3425, 1.3350, 1.3315

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

1.3480

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

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.