VBCE Weekly Foreign Exchange Wrap Up for April 24-28, 2017

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

USDCAD opened the week near 1.3500 but quickly dipped to 1.3410 after positive market sentiment ensued after the round 1 outcome of the French election. Late Monday afternoon, Trump announced a 20% tariff on Canadian softwood lumber and USDCAD broke above the 1.3530/35 March 2017 high. The uptrend continued reaching 1.3649 Wednesday evening before another Trump statement (he would not abandon NAFTA) sent the pair sharply lower towards 1.3530. The NAFTA comment effects faded the next morning and USDCAD climbed back towards 1.3650. Despite poor U.S. 1st quarter GDP data Friday, the technical uptrend continued with a test of 1.3700 (high 1.3692/97) before falling back towards 1.3630.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3497

1.3410

1.3697

1.3653

EURCAD

1.4477

1.4477

1.4942

1.4850

GBPCAD

1.7299

1.7176

1.7717

1.7655

JPYCAD

0.01237

0.01214

0.01238

0.01222

AUDCAD

1.0182

1.0122

1.0263

1.0212

Themes for the week:

*USDCAD breaks out – breaks previous March 2017 high of 1.3535 and extends gains to 1.3697

*Trump announces 20% softwood lumber tariff – send USDCAD above the 1.35 – 1.3535 resistance zone

*Oil prices neutral in a $48.54 - $50.19 range

*Canada retail sales: -0.6% (exp -0.1% / prev 2.3%) core: -0.1% (exp -0.3% / prev 2.3%)

*U.S. durable goods: 0.7% (exp 1.2% / prev 2.3%) core: -0.2% (exp 0.4% / prev 0.7%)

*Trump states that he will not abandon NAFTA – USDCAD plunges from 1.3649 to 1.3528

*Canada GDP (Feb): 0% exp 0.1% / prev 0.6% y/y: 2.5% (exp 2.6% / prev 2.3%)

*U.S. GDP (Q1): 0.7% (exp 1.2% / prev 2.1%)

*U.S. Fed funds futures interest rate hike probability (June) 67.4%

On Tap for Next week:

Wed May 3: U.S. ADP employment: exp 175k / prev 263k

U.S. Fed interest rate announcement: exp. unchanged @ 1%

Thur. May 4: Canada trade balance: exp -$0.80 billion / prev -$0.97 billion

U.S. trade balance: exp -$44.50 billion / prev -$43.60 billion

Fri May 5: Canada net employment change: exp 10,000 / prev 19,400

Canada unemployment rate: exp 6.7% / prev 6.7%

U.S. non-farm payrolls: exp 185,000 / prev 89,000

U.S. unemployment rate: 4.6% / prev 4.5%

Technically, USDCAD is trending higher after a sustained break above the 1.3530/35 (2017 high) and 1.3600 (Feb – Dec 2016 high) resistance zones. The main event risk is Wednesday's U.S. Fed statement. Despite a rate hike at the March meeting, the accompanying statement was less hawkish and the USD decline across the board.

Topside targets to consider: 1.3670, 1.3700, 1.3745, 1.3780

Downside targets to consider: 1.3620, 1.3530, 1.3410, 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.