VBCE Weekly Foreign Exchange Wrap Up for July 31 – August 4, 2017

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

The CAD was the worst performing currency this past week despite oil prices holding near 2 months highs and another solid Canadian employment report that saw the unemployment rate fall to a 9 year low and the addition of 35,000 full-time jobs. The CAD was unable to build on the strong finish from the previous week and steadily lost ground. After opening the week near 1.2433, USDCAD climbed to 1.2668 on Friday – close to a 3 week high. Against the other major currencies, the USD was under pressure for much of the week. EURUSD reached 1.1885, its highest level since January of 2015 before falling to 1.1750 after the U.S. employment data. The AUD came close to 0.80 – the highest since May 2015 before falling to 0.7900. The USD made strong gains on Friday after an all-around solid employment report that included upward revisions to prior data.

Weekly Open

Low

High

Weekly Close

USDCAD

1.2433

1.2433

1.2668

1.2649

EURCAD

1.4612

1.4583

1.4958

1.4871

GBPCAD

1.6330

1.6312

1.6726

1.6476

JPYCAD

0.01123

0.01123

0.01144

0.01141

AUDCAD

0.9935

0.9930

1.0047

1.0019

Themes for the week:

*USD correction phase – recovers from 25 month low vs. the CAD, 26 month low vs. AUD, 2.5 year low vs. EUR, and 14 month low vs. GBP

*WTI crude oil flat in a $48.53 - $50.40 range - near 2 month highs

*Bank of England interest rate decision: unchanged @ 0.25% (exp 0.25% / prev 0.25%)

*Canada net employment change: 10,900 (exp 10,000 / prev 45,300)

*Canada unemployment rate: 6.3% (exp 6.5% / prev 6.5%)

*Canada trade balance: -$3.6 billion (exp -$1.35 billion / prev -$1.36 billion)

*U.S. non-farm payrolls: 209,000 (exp 183,000 / prev 231,000)

*U.S. unemployment rate: 4.3% (exp 4.3% / prev 4.4%)

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

*U.S. trade balance: -$43.6 billion (exp -$45.00 billion / prev -46.40 billion)

On Tap for Next week:

Thurs Aug 10: U.S. producer price index m: exp 0.1% / prev 0.1% y/y: 2.2% / prev 2.0%

Friday Aug. 11: U.S. consumer price index m/m: 0.2% / prev 0% y/y: 1.8% / prev 1.6%

U.S. Core CPI m/m: exp 0.2% / prev 0.1% y/y: exp 1.7% / prev 1.7%

Technically, USDCAD is neutral / bullish. The uptrend for the CAD stalled the previous week with the CAD finishing largely unchanged vs. most major currencies. However this week saw the CAD lose ground across the board. Specifically, USDCAD made higher "highs" every day this week. After the Bank of Canada raised interest rates on July12th, USDCAD dropped from 1.2941 down to 1.2640 over the next few days. Over that time frame, USD rallies stalled in the 1.2720 – 1.2770 range. The correction off of the late July 1.2414/1.2420 "triple bottom" (25 month low) should continue in the days ahead and test this key 1.2720 -1.2770 range.

Topside targets to consider: 1.2668, 1.2720, 1.2750, 1.2770

Downside targets to consider: 1.2650, 1.2605, 1.2550, 1.2500

USDCAD 2017 Forecast (Canadian Banks) Aug. 2017

Bank

2017 Q3

2017 Q4

2018 Q1

HSBC

1.25

1.25

N/A

TD Canada Trust

1.25

1.28

1.27

National Bank

1.25

1.29

1.30

RBC

1.25

1.30

1.31

CIBC

1.28

1.30

1.33

BMO

1.2667

1.29

1.28

Scotia Bank

1.30

1.28

1.28

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, BNN

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.