VBCE Weekly Foreign Exchange Wrap Up for May 22-26, 2017

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

USDCAD opened the week near the 1.35 level and dipped to 1.3456 before climbing to 1.3541 ahead of Wednesday's Bank of Canada interest rate decision. The Bank held rates unchanged at 0.50% while offering up a more optimistic tone resulting in a move lower towards 1.3410 by the end of the day. After a look at 1.3388 on Thursday, a 6%+ plunge in oil prices after OPEC announced that oil output cuts would be maintained / extended forced USDCAD up to 1.3497. Rumours of a potential "deeper" output cut had made headlines over the past week. Oil would recover towards $50 on Friday – up nearly 4% on the day and USDCAD closed the week near 1.3446. The GBP was the worst performing currency having lost nearly 6 cents to the CAD over the past 6 days. It appears the UK election race is narrowing in recent weeks.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3513

1.3388

1.3541

1.3446

EURCAD

1.5141

1.5001

1.5200

1.5025

GBPCAD

1.7614

1.7193

1.7629

1.7211

JPYCAD

0.01215

0.01199

0.01217

0.01207

AUDCAD

1.0078

1.0009

1.0117

1.0007

Themes for the week:

*CAD outperforms despite Thursday's 6%+ oil price plunge

*USDCAD bearish trend gaining momentum – 4th consecutive lower weekly close

*Oil price plummets 6%+ from $52 down to $48.21 before rallying back towards $50 after OPEC announced it would maintain output cuts

*Bank of Canada interest rate: unchanged @ 0.50% - acknowledged improving Canadian data / economic adjustment to oil price decline is largely complete

*U.S. GDP Q1 (2nd reading): 1.2% (exp 0.9% / prev 0.7%)

*U.S. June rate hike probability rises to 87.6%

On Tap for Next week:


Wed. May 31: Canada GDP (Mar) exp 0.2%/prev 0% Q1 annualized exp 3.9%/prev 2.6%

Fri. June 2: Canada trade balance: exp -$0.07 billion / prev -$0.14 billion

U.S. Non-farm payrolls: exp 182,000 / prev 211,000

U.S. unemployment rate: exp 4.4% / prev 4.4%

U.S. average hourly earnings: exp 0.2% / prev 0.3%

U.S. trade balance: -$46.10 billion / prev -$43.70 billion

Technically, USDCAD continues to trade with bearish tendencies. Although the pairing corrected up to 1.3497 after the initial fall to 1.3388, the 1.35 level could not be reclaimed despite a 6%+ fall in oil prices and a better than expected U.S. 1st quarter GDP revision. With U.S. data expected to ease further next week, the USD may continue to trend lower.

Topside targets to consider: 1.3497, 1.3541, 1.3575, 1.3600

Downside targets to consider: 1.3430, 1.3388, 1.3325, 1.3250

USDCAD 2017 Forecast (Canadian Banks) May 2017

Bank

2017 Q2

2017 Q3

2017 Q4

HSBC

1.37

1.35

1.35

TD Canada Trust

1.36

1.34

1.33

National Bank

1.36

1.38

1.35

RBC

1.38

1.39

1.40

CIBC

1.35

1.36

1.34

BMO

1.3520

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

083e3d7a6b

Follow us




Follow us on Twitter @vbcefx


Disclaimer


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.