VBCE Weekly Foreign Exchange Wrap Up for September 4 - 8, 2017

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

VBCE Weekly Foreign Exchange Wrap Up for Sep. 4 – Sept. 8, 2017

The CAD has been the best performing currency during the past two weeks. USDCAD has fallen 6 cents - from 1.2663 down to 1.2060 – to the lowest level since May of 2015. The pairing opened this past week near 1.2395 and dropped to 1.2137 after the surprise 0.25% Bank of Canada interest rate hike (to 1.00%) before climbing to hold a 1.22 – 1.2250 range. USDCAD then dropped to 1.2060 during Friday's Asian session but rebounded to close the week near 1.2160 as Canada surprisingly shed 88,100 full time jobs and oil prices lost about 5.5% on the week.

Weekly Open

Low

High

Weekly Close

USDCAD

1.2395

1.2060

1.2428

1.2157

EURCAD

1.4704

1.4503

1.4811

1.4600

GBPCAD

1.6055

1.5835

1.6204

1.6030

JPYCAD

0.01124

0.01115

0.01141

0.01126

AUDCAD

0.9887

0.9743

0.9921

0.9791

Themes for the week:

*CAD outperforms – USDCAD hits 28 month low, EURCAD near 4 month low, GBP near 7 month low, JPY near 9 month low

*WTI falls 5.5% from $49.33 down to $46.70 – first week of inventory builds in past 10

*Crude oil inventories: +4.58 million barrels (exp +4.022 million / prev -5.392 million)

*Australian Central Bank (RBA) interest rate: 1.5% (exp 1.5% / prev 1.5%)

*Canadian trade balance: -$3.04 billion (exp -$3.10 billion / prev -$3.76 billion)

*U.S. trade balance: -$43.70 billion (exp -$44.60 billion / prev -$43.50 billion)

*Bank of Canada interest rate: 1.00% (exp 0.75% / prev 0.75%)

*European Central Bank (ECB) interest rate: 0% (exp 0% / prev 0%)

*Canada employment: 22,200 (exp 19,000 / prev 10,900)

*Canada full time employment: -88,100 (prev +35,100)

*Canada unemployment rate: 6.2% (exp 6.3% / prev 6.3%)

On Tap for Next week:


Wed Sept 13: U.S. producer price m/m: exp 0.3% / prev -0.1% y: exp 2.5% / prev 1.9%

U.S. PPI core m/m: exp 0.2% / prev -0.1% y/y: exp 2.1% / prev 1.8%

Thur Sept 14: Bank of England interest rate: exp 0.25% / prev 0.25%

U.S. CPI m/m: exp 0.3% / prev 0.1%) y/y: exp 1.8% / prev 1.7%)

U.S. core CPI m/m: 0.2% prev 0.1% y/y: exp 1.6% / prev 1.7%

Fri Sept 15: U.S. retail sales: exp 0.1% / prev 0.6% core: exp 0.5% / prev 0.5%

Technically, USDCAD is bearish. The pairing continues to break and remain below key technical support levels – namely the 1.2420 and the 1.2337 levels which were broken this month. The down-move extended to 1.2060 with rebounds hitting resistance at 1.2165 to end the week. Technically USDCAD is oversold having fallen 6 cents over the past 2 weeks. The CAD will likely consolidate its recent gains as there is no key Canadian data this week. Markets will look towards U.S. inflation data which is expected to improve. Higher inflation should put some upward pressure on the USD as this would increase the probability of another Fed interest rate hike by year end.

Topside targets to consider: 1.2175, 1.2250, 1.2360, 1.2425

Downside targets to consider: 1.2100, 1.2060, 1.1940, 1.1800

USDCAD 2017 Forecast (Canadian Banks) Aug / Sept.

Bank

2017 Q3

2017 Q4

2018 Q1

HSBC

1.20

1.20

N/A

TD Canada Trust

1.25

1.28

1.27

National Bank

1.20

1.22

1.24

RBC

1.21

1.24

1.27

CIBC

1.24

1.30

1.33

BMO

1.2667

1.29

1.2960

Scotia Bank

1.20

1.20

1.18

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

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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.