VBCE Weekly Foreign Exchange Wrap Up for Feb. 25 – Mar. 1, 2019

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

The CAD had a volatile week initially falling to 1.3112 (close to the Feb low of 1.3068) before climbing to 1.3235. Oil prices slumped nearly 3% early in the week on Trump's tweet: "Oil prices getting too high. OPEC, please relax and take it easy." The move above 1.32 was short-lived as U.S. Fed Chair Powell offered up some dovish comments that sent U.S. 10 year yields down towards 1 year lows and broadly weakened the USD. It was also reported that Saudi Arabia could extend oil production supply cuts through the end of 2019. Oil prices rallied 3% on the reports while USDCAD dropped back towards 1.3118. The trend changed again on Thursday as U.S. 4th quarter GDP data beat estimates sending the USD and 10 year yields higher. USDCAD climbed to 1.3207 before falling back to 1.3140. On Friday, Canadian 4th quarter GDP results were far weaker than expected sending USDCAD from 1.3130 up to 1.3307 – just shy of the February high of 1.3340. The move higher was aided by a 4% drop in oil prices. The CAD and the JPY were the worst performing currencies this week while the GBP outperformed as the probability of a "No Deal" Brexit diminishes.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3133

1.3112

1.3306

1.3283

EURCAD

1.4900

1.4881

1.5121

1.5105

GBPCAD

1.7160

1.7140

1.7581

1.7555

JPYCAD

0.01187

0.01172

0.01196

0.01188

AUDCAD

0.9370

0.9306

0.9477

0.9400

Key Events for the week:

*USDCAD declines towards 3 week lows before climbing to 2 week high

*EUR holds climbs from 3 month lows to 1 month high

*GBP climbs to 8 month highs

*JPY declines to 3 month lows before rebounding

*AUD holds near 4 month lows

*WTI volatile in a $55.19 - $58.06 range - gains as much as 5% towards mid Nov 2018 highs before plunging 4% on Friday

*USD index (DXY) flat – range 95.82 to 96.61

*U.S. housing starts: -11.2% (exp -0.5% / prev 0.4%)

*Canada CPI m/m: 0.1% (exp 0.2% / prev -0.1%)

*Canada CPI y/y: 1.4% (exp 1.5% / prev2.0%)

*EIA crude oil stocks change: -8.647 million (exp 2.842m / prev 3.672m)

*Japan industrial production m/m: -3.7% (exp -2.5% / prev -0.1%)

*Japan retail trade y/y: 0.6% (exp 1.1% / prev 1.3%)

*Germany CPI y/y: 1.7% (exp 1.7% / prev 1.7%)

*U.S. GDP Q4 annualized: 2.6% (exp 2.3% / prev 3.4%)

*Japan Tokyo CPI ex fresh food y/y: 1.1% (exp 1.0% / prev 1.1%)

*Japan unemployment rate: 2.5% (exp 2.4% / prev 2.4%)

*China Caixin mfg. PMI: 49.9 (exp 48.5 / prev 48.3)

*Eurozone unemployment rate: 7.8% (exp 7.9% / prev 7.8%)

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

*Canada GDP (Dec): -0.1% (exp 0% / prev -0.1%)

*Canada GDP Q4 annualized: 0.4% (exp 1.2% / prev 2.0%)

*U.S. ISM manufacturing PMI: 54.2 (exp 55.5 / prev 56.6)

*U.S. 10 year Treasury yields climbs from 1 year lows to 5 week highs (2.63% - 2.76%)

On Tap for Next week:


Tue Mar 5: Australia central bank interest rate: exp 1.5% / prev 1.5%

China Caixin services PMI: exp 53.8 / prev 53.6

Eurozone retail sales y/y: exp 1.2% / prev 0.8%

U.S. ISM non-manufacturing PMI: exp 57.2 / prev 56.7

Wed Mar 6: Australia GDP y/y Q4: exp 2.6% / prev 2.8%

U.S. ADP employment change: exp 190k / prev 213k

U.S. trade balance: exp -$57.0 billion / prev -$49.3 billion

Canada Int'l merchandise trade: exp -$2.80 billion / prev -$2.06 billion

Bank of Canada interest rate decision: exp 1.75% / prev 1.75%

Thur Mar 7: Australia retail sales: exp 0.3% / prev -0.4%

Eurozone GDP y/y Q4: exp 1.2% / prev 1.2%

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

Fri Mar 8: China trade balance: exp $25.55 billion / prev $39.16 billion

China exports: exp -4.5% / prev 9.1%

China Imports: exp -1.4% / prev -1.5%

U.S. non-farm payrolls: exp 185,000 / prev 304,000

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

U.S. avg hourly earnings y/y: exp 3.3% / prev 3.2%

Canada net employment change: prev 66,800

Canada unemployment rate: exp 5.7% / prev 5.8%

Technically, USDCAD is neutral / bullish. The pairing failed to break below the February low of 1.3068 (Monday's lows was 1.3112) and broke above resistance in the 1.3200 – 1.3240 area to effectively close the week just under 1.3300 and within sight of the February high of 1.3340.

Topside targets to consider: 1.3300, 1.3320, 1.3340, 1.3380

Downside targets to consider: 1.3240, 1.3210, 1.3130, 1.3085

Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada.S. Federal Reserve, CNBC, Forexlive, CME Group

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