Loonie devalued and Poloz is comforted
USDCAD Open 1.2325-30 Overnight Range 1.2317-1.2373
FX markets were a tad skittish in Asia but rather sedated in Europe as they await Mario Draghi’s version of QE.
The self-proclaimed “open and transparent” Bank of Canada made a sneaky and unexpected rate cut yesterday. The governor and former Export Development Corporation head honcho surveyed the short term panic in the domestic markets and ‘Harrumphed” that “he was comforted that the possibility of a rate cut had begun to emerge in markets over the last couple of weeks” . It was his Pontius Pilate moment as he washed his hands
Really? It appears that when your head is firmly inserted into a narrow, dark orifice, the fact that domestic bank economists and strategists that were pushing out the timing of a BoC rate increase, is the same as thinking of a rate cut.
On another note, when the BoC announced the rate cut, USDCAD soared nearly 0.200 points. Part of the reason for the that spike is that at least 2 major Canadian FX banks stopped quoting prices until they knew “what the heck is going on” (heck was spelled with an “F”).These prices feed the myriad of third party FX trading platforms. Wall Street is famous for its “Masters of the Universe”, Bay Street has the “Wussies of the World”. When the going gets tough-turn off the machines!
The intraday USDCAD technicals are pretty much useless. The short term technicals are bullish while trading above 1.2000 aided by the break above the 76.4% Fibo retracement of the 2009-2011 range which was at 1.2200. That break opened up a straight shot to 1.2405 which is guarding resistance at 1.2490-1.2510. The steepness of yesterday’s move warns that corrections lower can be large while maintaining the uptrend.
For today, USDCAD support is at 1.2280, 1.2240 and 1.2200. Resistance is at 1.2380, 1.205 and 1.2500
Today’s Range 1.2280-1.2380