August 29, 2012
|USD/CAD Open 0.9850-55 Overnight Range ( including Monday) 0.9847-0.9867
The Canadian dollar is starting September with a positive bias, supported to a degree by bullish Canadian dollar technicals, rising WTI oil prices and generally strong economic data. However, the key driver of CAD$ strength is the perception that Bernanke will unleash details of QElll next week, devaluing the US dollar in the process. The RBA left rates unchanged at 3.5% lifting the Aussie a tad while USD/JPY stays in a tight 72.20-79.20 range. The ECB’s Mario Draghi told the EU Economic and Monetary affairs committee that the ECB could buy bonds of 3 years or less, which would be within the ECB’s mandate. The EUR/USD rose on the back of these remarks. Asian equity indices closed down, European equity indices are lower and NY equity futures are up, to start the day. WTI oil is $97.18 and gold is $1,695.60. US data on tap today includes; Manufacturing PMI (51.2), ISM Manufacturing (50.0) and total vehicle sales. There are no Canadian data releases.
The short term (hourly) USD/CAD technicals are bearish USD. The 0.9840 support level for USD/CAD was tested and held. A move through here should see a CAD$ rally to 0.9800. A move back through resistance at 0.9880 should extend gains to a minimum of 0.9940 with 1.0040 a risk. For today, USD support is at 0.9840 and 0.9810. Resistance is at 0.9875 and 0.9905
The results for the Quebec provincial election today could pose long term risks to the Canadian dollar. The separatist party, Parti-Quebecois are leading in the polls at the moment and could end up with a majority government. The leader, Pauline Marois is on record saying that “she would hold a referendum on separating from Canada, tomorrow, if the conditions were right. While not an immediate threat, it does introduce an element of political uncertainty in the months ahead.
More immediate FX risks are the ECB press conference on Thursday and payroll reports from Canada and the US on Friday.
And in other news, a high school in Louisiana is holding a reunion for the class of 1973, restricted to whites only. Apparently, they have been doing this every year since they finished their formal education in grade nine. Some members actually found part time work on fishing boats and the rest were content to sit in front of their trailers, counting their teeth, and hoping that their next welfare check would cover the cost of new bed sheets.
Today’s Range 0.9840-0.9875