VBCE Weekly Foreign Exchange Wrap Up and Forecast for July 30 – Aug. 3, 2018

VBCE Weekly Foreign Exchange Wrap Up and Forecast for July 30 – Aug. 3, 2018

The CAD was the best performing currency for the 2nd consecutive week reaching multi-month highs vs most currency pairings. USDCAD fell from 1.3080 down to 1.2990 before climbing to 1.3098. The spike higher was short-lived coming off some NAFTA related headlines that Canada was to be excluded from a meeting between the U.S. and Mexico. The same day, Canada posted a very strong May GDP figure sending USDCAD down to 1.2982. The pairing held a 1.2967 – 1.3040 range over the balance of the week helped by some NAFTA positive headlines and positive market sentiment. Also, helping the CAD were some very strong trade data for the month of June. Despite the introduction of steel and aluminum tariffs in June, Canada's trade deficit surprisingly narrowed to the best level in 19 months. In addition, Canada's exports surged to a record $50.7 billion.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3060

1.2968

1.3098

1.2988

EURCAD

1.5222

1.5020

1.5325

1.5020

GBPCAD

1.7115

1.6870

1.7175

1.6887

JPYCAD

0.01176

0.01158

0.01180

0.01167

AUDCAD

0.9670

0.9580

0.9708

0.9602

Themes for the week:

*CAD is the top performer on strong domestic data / NAFTA optimism - USDCAD falls from 1.3080 down to 1.2968 - 7 week low

*EUR falls to 2 month lows, JPY near 6 month lows, GBP near 7 month lows, AUD near 2 year lows

*WTI crude oil closes unchanged within a $66.90 -$70.40 range

*Japan unemployment rate: 2.4% (exp 2.3% / 2.2%)

*Bank of Japan interest rate: -0.1% (exp -0.1% / prev -0.1%)

*Germany retail sales: 1.2% (exp 1% / prev -2.1%)

*Germany unemployment rate: 5.2% (exp 5.2% / prev 5.2%)

*Eurozone GDP Q2y/y: 2.1% (exp 2.2% / prev 2.5%)

*Eurozone unemployment rate: 8.3% (exp 8.3% / prev 8.3%)

*Eurozone core CPI y/y: 1.1% (exp 1.0% / prev 0.9%)

*Canada GDP (May): 0.5% (exp 0.4% / prev 0.1%)

*U.S. ADP employment change: 219,000 (exp 185,000 / prev 181,000)

*U.S. Fed interest rate decision: 2.0% (exp 2.0% / prev 2.0%)

*Bank of England interest rate decision: 0.75% (exp 0.75% / prev 0.50%)

*Canada international merchandise trade: -$0.63b (exp -$2.3b/ prev -$2.72b)

*U.S. non-farm payrolls: 157,000 (exp 190,000 / prev 248,000)

*U.S. unemployment rate: 3.9% (exp 3.9% / prev 4.0%)

*U.S. average hourly earnings y/y: 2.7% (exp 2.7% / prev 2.7%)

*U.S. trade balance: -$46.3 billion (exp -$46.5 billion / prev -$43.2 billion)

*U.S. 10 year Treasuries flat between 2.94% up to 3.01%

On Tap for Next week:


Mon Aug 6: Canada civic holiday

Tue Aug 7: Australia RBA interest rate: exp 1.5% / prev 1.5%

Wed Aug 8: China trade balance: exp $39.33 billion / prev $41.61 billion

Japan machinery orders m/m: -1.3% y/y: -3.7%

Thur Aug 9: China CPI m/m: exp 0.2% / prev -0.1% y/y exp 1.9% / prev 1.9%

U.S. producer price index m/m: exp 0.2% / prev 0.3% y/y: exp 3.4% / prev 3.4%

Fri Aug 10: UK GDP (June): exp 0.2% / prev 0.3% Q2 (qoq): exp 0.4% / prev 0.2%

U.S. CPI m/m: exp 0.2% / prev 0.1% y/y: exp 2.9% / prev 2.9%

CPI ex food & energy m/m: exp 0.2% / prev 0.2% y/y: exp 2.3% / prev 2.3%

Canada net employment change: exp 24,000 / prev 31,800

Canada unemployment rate: exp 5.8% / prev 6%

Technically, USDCAD is bearish / neutral. Although downside gains were limited this week to just shy of the key technical 1.2960 level, top-side rallies were generally contained by resistance at 1.3040. The weekly close below the psychological 1.30 level puts downside / renewed USD weakness in focus for next week with CAD gains accelerating on a break below 1.2960.

Topside targets to consider: 1.3040, 1.3080, 1.3108, 1.3135

Downside targets to consider: 1.2960, 1.2920, 1.2860, 1.2820

USDCAD 2018/2019 Forecast

2018 Q3

2018 Q4

2019 Q1

2019 Q2

BMO

1.3056

1.2826

1.2710

1.2650

CIBC

1.3300

1.3400

1.3100

1.2800

National Bank

1.3200

1.2800

1.2800

1.2700

RBC

1.3000

1.2800

1.2600

1.2600

Scotiabank

1.2800

1.2800

1.2500

1.2200

TDCanada Trust

1.2820

1.2820

1.2658

1.2658

GBPUSD 2018/2019 Forecast

2018 Q3

2018Q4

2019 Q1

2019Q2

BMO

1.3066

1.2866

1.2600

1.3000

CIBC

1.3000

1.3300

1.3600

1.3900

National Bank

1.2800

1.3100

1.3300

1.3400

RBC

1.2700

1.2000

1.2300

1.2500

Scotiabank

1.3000

1.3200

1.3200

1.3500

TDCanada Trust

1.3700

1.3900

1.4000

1.4100

GBPCAD 2018/2019 Forecast

2018 Q3

2018 Q4

2019 Q1

2019 Q2

BMO

1.7059

1.6502

1.6015

1.6445

CIBC

1.7290

1.7822

1.7816

1.7792

National Bank

1.6896

1.6768

1.7024

1.7018

RBC

1.6510

1.5360

1.5498

1.5750

Scotiabank

1.6640

1.6896

1.6500

1.6470

TDCanada Trust

1.7563

1.7820

1.7721

1.7848

EURUSD 2018/2019 Forecast

2018 Q3

2018 Q4

2019 Q1

2019 Q2

BMO

1.1666

1.1766

1.1800

1.2000

CIBC

1.1600

1.1800

1.2000

1.2300

National Bank

1.1500

1.1800

1.2000

1.2100

RBC

1.1600

1.1200

1.1400

1.1600

Scotiabank

1.1700

1.2000

1.2200

1.2500

TD Canada Trust

1.2000

1.2100

1.2200

1.2300

EURCAD 2018/2019 Forecast

2018 Q3

2018 Q4

2019 Q1

2019 Q2

BMO

1.5231

1.5091

1.4998

1.5180

CIBC

1.5428

1.5812

1.5720

1.5744

National Bank

1.5180

1.5104

1.5360

1.5367

RBC

1.5080

1.4336

1.4364

1.4616

Scotiabank

1.4976

1.5360

1.5250

1.5250

TD Canada Trust

1.5384

1.5512

1.5443

1.5569

2018 Summary

2018 Open

Low

High

2018 Last

USDCAD

1.2580

1.2253

1.3387

1.2988

EURCAD

1.5100

1.4820

1.6140

1.5020

GBPCAD

1.6975

1.6761

1.8292

1.6887

JPYCAD

0.01116

0.01091

0.01239

0.01167

AUDCAD

0.9811

0.9549

1.0243

0.9602

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.