October 23, 2012
USD/CAD 0.9962-67 Overnight Range: 0.9818-0.9918-0.9967
The Canadian dollar is looking wobbly ahead of today’s eagerly anticipated bank of Canada interest rate announcement following another uneventful overnight session. The AUD/USD was a tad softer on rate cut speculation while USD/JPY firmed on talk of further QE. The EUR/USD was off its highs in part due to Moody’s downgrading some Spanish regions although they had left the country rating unchanged last week. Asian equity indices rose but European equity indices were all in the red. NY equity indice futures are also down. WTI oil is $87.64 and gold is $1,710.50.
The short term USD/CAD technicals are bullish while trading above 0.9880, supported by the break of 0.9940, targeting both the 100 and 200 day moving averages around 1.0000. A decisive move above these levels will lead to a spike to 1.0240. Only a move below 0.9880 removes the pressure. For today, USD support is at 0.9940, 0.9910 and 0.9880. Resistance is at 0.9980, 0.9995 and 1.0010.
The Bank of Canada will leave rates unchanged today which is unanimously expected. What’s in question is whether or not the BoC drops the reference to" some modest withdrawal of the present considerable monetary stimulus may become appropriate” line. Speculation that such an action is a precursor to a rate cut has undermined the Canadian dollar in recent days, with many economists noting that disappointing growth data has spurred rate reductions in a number of countries including Australia and so Canada will follow suit.
What everyone seems to be ignoring is that the BoC governor has not reduced his rhetoric about the rising consumer debt levels and the risks that this poses to the Canadian economy. However the semantics and nuances in today’s statement are interpreted, I believe that the Bank of Canada is not contemplating rate cuts and that they are happy with an overnight rate of 1%.
And in other news, Mitt and Barak entertained the world last night as they both tried to convince American voters that they have the solution to the Middle East woes. Unfortunately, the solution appears to be bombing Iran back to the future, a course of action that has many Iranian’s wanting an alternative candidate.
Today’s Range 0.9910-0.9980
The content and opinions expressed within this commentary are solely those of the author(s) and are not necessarily shared by Jitney Trade. The data and comments provided herein are for informational purposes only and must not be construed as an indication or guarantee of any kind of what the future performance of the concerned markets will be. There is a substantial risk of loss in trading commodity futures, options and foreign exchange products and is not suitable for all investors. Contact your account representative for more information on these risks. Information and opinions contained herein come from sources believed to be reliable but are not guaranteed as to accuracy or completeness. Please carefully consider your financial condition prior to making any trading decisions.
Vice President, FX Trading