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. 1^st quarter GDP data Friday, the technical uptrend continued with a test of 1.3700 (high 1.3692/97) before falling back towards 1.3630.

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