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VBCE Weekly Foreign Exchange Wrap Up for Jan. 15 – Jan. 19, 2018

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

The CAD was the worst performing currency this past week despite an interest rate hike by the Bank of Canada on Wednesday. USDCAD initially climbed from 1.24 up to 1.2520 ahead of the announcement before falling to 1.2370 once the rate hike was announced. A dovish tone to the BOC statement sent USDCAD back up to 1.2500 before a more neutral / less dovish press conference by the BOC Governor strengthened the CAD sending USDCAD back down to 1.2380. The pairing climbed to 1.2480 on Thursday before falling back to 1.2400 in early Friday trade on general concerns over a possible U.S. government shutdown. The trend abruptly changed during Friday's North American session sending USDCAD back up to test the 1.2500 level.

Weekly Open

Low

High

Weekly Close

USDCAD

1.2455

1.2370

1.2520

1.2490

EURCAD

1.5197

1.5148

1.5305

1.5258

GBPCAD

1.7095

1.7077

1.7336

1.7304

JPYCAD

0.01122

0.01116

0.01129

0.01127

AUDCAD

0.9868

0.9849

1.0000

0.9976

Themes for the week:

*The AUD & GBP lead while the CAD lags

*USDCAD holds near 3 month lows, EURCAD, GBPCAD, and JPYCAD near 1 month highs, and AUDCAD near 4 month highs

*WTI crude oil holds near 3 year highs in a $62.93 - $64.77 range

*EUR CPI y/y: 1.4% (exp 1.4% / prev 1.4%)

*Bank of Canada interest rate: 1.25% (exp 1.25% / prev 1.00%)

*Australia employment change: 34,700 (exp 9,000 / prev 63,600)

*China retail sales y/y: 9.4% (exp 10.1% / prev 10.2%)

*China GDP Q4 y/y: 6.8% (exp 6.7% / prev 6.8%)

*U.K. retail sales m/m: -1.5% (exp -0.6% / prev 1.0%) y/y: 1.4% (exp 3.0% / prev 1.5%)

*Canada manufacturing shipments: 3.4% (exp 2.0% / prev -0.4%)

On Tap for Next week:


Tue Jan 23: Bank of Japan interest rate: -0.1% (exp -0.1% / prev -0.1%)

Thur Jan 25: ECB interest rate decision: exp 0% / prev 0%

Canada retail sales: exp -0.1% / prev 1.5%

Japan CPI y/y: exp 0.3% / prev 0.6%

Fri Jan 26: UK GDP Q4 y/y: exp 1.5% / prev 1.7%

U.S. Q4 GDP annualized: exp 3.0% / prev 3.2%

Canada CPI y/y: exp 2.1% / prev 2.1%

Technically, USDCAD is neutral. After the last failed test of 1.2900 on Dec. 19th, the USDCAD downtrend stalled at 1.2355 on Jan. 5th. After the pairing corrected higher to 1.2590 during the week of Jan 8-12, the downtrend resumed and the 1.2400 level was broken this week. However, trade below the 1.2400 level could not be sustained and USDCAD rallied back to test the 1.25 level. A sustained break below 1.2400 or above 1.2500 will be required for a change in trend.

Topside targets to consider: 1.2495, 1.2550, 1.2590, 1.2625

Downside targets to consider: 1.2430, 1.2400, 1.2375, 1.2350

USDCAD 2018 Forecast

Bank

2018 Q1

2018 Q2

2018 Q3

2018 Q4

TDCanada Trust

1.25

1.2345

1.2345

1.2345

National Bank

1.22

1.21

1.24

1.28

RBC

1.33

1.30

1.27

1.24

CIBC

1.28

1.33

1.32

1.31

BMO

1.2616

1.2750

1.2670

1.2540

Scotia Bank

1.28

1.27

1.26

1.25

2017 CAD Summary

2017Summary

2017Open

Low

High

2018 Last

USDCAD

1.3450

1.2060

1.3787

1.2420

EURCAD

1.4158

1.3788

1.5371

1.5277

GBPCAD

1.6590

1.5736

1.7849

1.7390

JPYCAD

0.01150

0.01091

0.01240

0.01126

AUDCAD

0.9708

0.9615

1.0343

0.9935

Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada, U.S. Federal Reserve, CNBC, Forexlive, CMEGroup, BNN

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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.