Slow start to short but busy week Loonieviews 24Nov14


Slow start to short but busy week

Michael O’Neill

FX Consultant / IFXA Ltd

Canada

Recommend

  • OPEC decision on Thursday could undermine Loonie
  • Wednesday’s data may be released to empty house
  • USDX supports further US dollar gains

By Michael O’Neill

Tokyo traders had a day off and the week has started slowly. The US dollar is mixed. The big dollar squeezed out gains against JPY and AUD while retreating against EUR and GBP. The week should be entertaining due to some major data risks ahead including Eurozone CPI, Canada and US GDP, with an OPEC meeting thrown in for good measure. The US Thanksgiving holiday will also drain liquidity, risking increased volatility.

People are strange and FX markets are as well

On Friday, no one wanted EURUSD in light of Mario Draghi’s remarks alluding to expanding the European Central Bank stimulus programme. It took the entire weekend for traders to seemingly conclude that Draghi didn’t really say anything that he had not already said before, and EURUSD has recouped some of its losses. It has only been about 10 weeks since the ECB announced negative rates for bank deposits on “too low inflation” concerns. Perhaps the rate cuts need more time to generate results. However, the risk of additional ECB stimulus action will rise with worse- -than-expected Eurozone CPI print on Friday.

More than 600 Kmart workers have signed a petition to address staff
working hours over Thanksgiving. Photo: Getty

Turkey, and a side of OPEC ahead

Americans will be gorging on turkey dinners with all the trimmings on Thursday unless they work at K-Mart. Those employees have to start work at 6:00 am or lose their jobs. The K-Mart employees won’t be the only people working though, as OPEC is meeting in Vienna. The issue is whether or not the cartel will agree to production cuts. A Bloomberg story says some commodity fund managers are warning of $60/bbl oil prices if cuts are not imposed. A member of the Kuwait Supreme Energy Council said on Sunday that he did not think that OPEC would cut production as all the members want to keep their market share. That doesn’t bode well for the Loonie. WTI is in a downtrend below $79.80 and recent moves below $75.00/bbl have led to USDCAD gains. The OPEC announcement is due on Thursday and with the US on holiday, the lack of liquidity could exaggerate a move.

Beware US data dump disappointment

There is a ton of data being dumped on Wednesday including Durable Goods, Personal Income and Expenditures, Chicago PMI, Jobless Claims and Reuters/Michigan Consumer Confidence to name a few. Individually, each release has been known to “move markets” but this time, not so likely. Wednesday is also one of the heaviest, if not the heaviest, travel day in the year for Americans. Traders will all be busy checking flight times, traffic and weather and ignoring the data prior to calling it a day around 16:00-17:00 GMT.

US dollar index says full steam ahead

The USDX rally since August remains intact while trading above 86.60, a level that is being guarded by a double bottom at 87.23. On Friday, the USDX broke through a triple top in the 88.30-35 area suggesting further upside toward 89.15. A move through support at 88.25 would extend to 88.05 and then 87.50.

Chart: Daily USDX with uptrend and target

Source: Saxo Bank

Key Canadian data releases

Tuesday: September Retail Sales (Forecast 0.5%, ex-autos 0.4%; month-over-month)

Friday: Q3 GDP (Forecast 0.4%, month-over-month or 2.1% annualised)

Key US data releases

Tuesday: Conference Board Consumer Confidence (Forecast, 96.0)

Tuesday: Q3 GDP (Forecast 3.3%)

Wednesday: October Durable Goods (Forecast negative 0.7%, ex-transportation 0.3%)

Wednesday Q3 Personal Consumption-Expenditure

Categories FX, Foreign Exchange, Currency, Canadian Dollar

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