Loonieviews 31Aug16


August ending with a whimper

USDCAD Open (6:00 am) 1.3090-94 Overnight Range 1.3081-1.3111 31Aug16

FX-At-A-Glance

NOTE: This chart represents gain (or loss) of G10 currencies vs. the US dollar from NY close (4::00pm) to Aug 31, 6:00 am EDT

August is ending with a whimper. USDCAD traded within a 0.0030 point range and opened in New York right where it closed, yesterday. Month-end rebalancing flows have so far been negligible which is expected to be the case for todays ”Fix” at 11:00 am.

Overnight, FX markets were very quiet. Aussie and Kiwi dipsy doodled within fairly narrow ranges while USDJPY didn’t stray too far from 103.00. Boston Fed President, Eric Rosengren and Chicago Fed President Charles Evans were speaking at the shanghai Advanced Institute. Mr. Rosengren sounded hawkish, saying “keeping interest rates low for a long time is not without risks”. Mr. Evans contradicted him when he said :he sees fewer financial stability concerns with the current low level of interest rates. FX traders didn’t to care, one way or the other.

In Europe, the Eurozone CPI index declined (Actual CPI-Aug. preliminary 0.2% vs. forecast 0.3%, y/y, Core-Actual 0.8% vs. forecast 0.9%, y/y)

FX markets will be watching today’s ADP Employment change report (forecast 175k) for clues to Friday’s nonfarm payrolls report. An upside surprise will keep the US dollar bid.

USDCAD traders will be watching GDP data. Canada Q2 GDP is expected to decline 1.5% q/q, largely due to the Alberta wildfires. That data shouldn’t have much impact on the Loonie as it is expected. However, the GDP data for June will be telling. It is expected to rise 0.4%. An upside surprise bodes well for the Bank of Canada’s Q3 forecast of 3.5%.

USDCAD technical outlook.

The intraday USDCAD technicals are bullish while trading above 1.3040 and looking to break resistance at 1.3110 to extend gains to 1.3190 and then 1.3250. A move below 1.3040 would target 1.2990 and suggest additional 1.2900-1.3100 consolidation. Longer term, the USDCAD uptrend from May remains intact while prices are above the 1.2750-70 zone. For today, USDCADS support is at 1.3060, 1.3030 and 1.3005. Resistance is at 1.3110 (overnight high) 1.3150 and 1.3190.

Today’s Range 1.3060-1.3150

Chart: USDCAD 30 minute

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Loonieviews 30Aug16


US dollar drifts higher

USDCAD Open (6:00 am) 1.3030-34 Overnight Range 1.3011-1.3046 30Aug16

FX-At-A-Glance

NOTE: This chart represents gain (or loss) of G10 currencies vs. the US dollar from NY close (4::00pm) to Aug 30, 6:00 am EDT

The US dollar squeezed out additional gains across the G10 spectrum in a subdued trading session. Traders were overly eager to get involved ahead of Federal Reserve Vice Chair Stanley Fisher’s interview on Bloomberg They are also a tad concerned about month end rebalancing flows and Friday’s nonfarm payrolls report.

Mr. Fisher’s Bloomberg interview was a non-event.

USDJPY declined in Asia but that move was short lived on verbal intervention by a Ministry of finance official. It opened in New York near the overnight high. EURUSD traded sideways within a narrow 1.1155-91 band. GBPUSD is in a small downtrend looking for a retest of 1.3000. Euro area data was ignored.

The Canadian dollar remains at the mercy of US dollar sentiment and at the moment, that sentiment is bullish. USDCAD ignored the minor rally in WTI which climbed to $47.43/b from a low of $46.91

The Canadian dollar may get a bit of relief if today’s Raw Materials, Current Account and Industrial Production data surpass forecasts.

USDCAD technical outlook.

The intraday USDCAD technicals are bullish while trading above 1.3020 looking for a break of resistance in the 1.3060-80 zone to extend gains to 1.3140. A move below 1.3020 would lead back to 1.2950. for today, USDCAD support is at 1.3020 and 1.2990. Resistance is at 1.3060, 1.3090 and 1.3110.

Today’s Range 1.2990-1.3080

Chart: USDCAD 4 hour

Loonieviews 29Aug16


Rate hike risks reinforce Dollar

USDCAD Open (6:00 am) 1.3010-14 Overnight Range 1.2976-1.3022 29Aug16

FX-At-A-Glance

NOTE: This chart represents gain (or loss) of G10 currencies vs. the US dollar from NY close (4::00pm) to Aug 29, 6:00 am EDT

USDCAD held on to Friday’s gains following what was deemed to be “hawkish” comments from Fed Chair, Janet Yellen. Sure, she said that she believed that the case for an increase in rates had strengthened but she also made similar remarks in her June 6, Philadelphia speech. After that speech, many analysts and traders were convinced that US rates would be increased June 15. Didn’t happen. Why should this time be any different?

Various Fed speakers have repeatedly said that they are cautious and watching the data which suggests that Friday’s US nonfarm payrolls number may have a bigger impact than usual.

Overnight, the US dollar was bid in fairly subdued trading due the UK Summer Bank Holiday which sucked a lot of liquidity out of the market. Cleveland Fed President, Loretta Mester ( a well-known hawk) added her voice to the rate hike camp. Bank of Japan governor Kuroda reminded markets that the BoJ would “decisively act” with more easing if needed.

Oil prices were a tad softer. A report that Iraq would increase supply and the firm US dollar were behind the move.

Aside from today, this week’s FX markets should be a lot more livelier than have been for the past few weeks, because of month end rebalancing flows on Wednesday, NFP on Friday and the G20 meeting in China on the weekend.

Today, US Personal Income and Consumption data is due this morning. There is no Canadian data.

USDCAD technical outlook.

The intraday USDCAD technicals are bullish while trading above 1.2930 supported by the break above resistance in the 1.2970-90 area. That move suggests further gains to the 1.3060-80 area. A break of the topside would put 1.3240-60 in play. Longer term, USDCAD remains trapped within a 1.2650-1.3250 trading band and 1.3000 is merely the middle of that range.

For today, USDCAD support is at 1.2980, 1.2960 and 1.2910. Resistance is at 1.3020 and 1.3080.

Today’s Range 1.2970-1.3060

Chart: USDCAD hourly

Wishy-washy Yellen doesn’t offer anything new 26Aug16


Wishy-washy Yellen doesn’t offer anything new

Michael O’Neill

FX Consultant / IFXA Ltd

Canada

  • Initial strong reaction quickly faded
  • Oil rally may be just wishful thinking
  • Loonie at middle of five-month range

Apparently, a place where cowboys and cowgirls meet. Pic: WIkimedia Commons

By Michael O’Neill

Janet Yellen’s Jackson Hole speech delivered something for rate hawks, at least that’s what the initial FX reaction looked like. However, that move is already starting to fade as traders realise that her speech wasn’t all that hawkish. Sure she said that she believes that the case for an increase in the Federal Funds rate has strengthened but she also said that the economic outlook is uncertain. That is just more of the wishy-washy Fed speak that the Federal Open Market Committee passes off as insight.

Loonie nearing half-way mark-again

USDCAD has bounced within a 1.2500-1.3250 band since March. That is a 0.0750-point range and the 1.2875 is the middle. A decisive break below that level would target 1.2750, the 61.8% Fibonacci retracement level.

The Bank of Canada has been on the sidelines and is expected to remain that way at the September 7 policy meeting. The BoC expects and big bounce in Q3 economic growth supported by the previously announced fiscal stimulus programs and will be content to “watch the incoming data”.

Meanwhile the two key drivers of USDCAD direction are oil prices and the Fed’s intentions. For all the most part, WTI has traded within a $39.00-$51.00 range since April. The uptrend from the August low of $39.15 remains intact while prices are above $45.85.

Arguably, if the $45.00-$5100 range holds, US interest rate sentiment will have the biggest influence on USDCAD direction.

As long as the expectations are for the Fed to boost rates by the end of the year, USDCAD losses should be limited.

Chart: USDCAD daily

Source: Saxo Bank

Why can’t we be friends

War sang that question as the title track of their 1975 album. It is the same question that US President Obama is asking Iran’s President Hassan Rouhani after the USS Squall fired flares at Republican Guard vessel.

The US blames Iran for violating International waters but didn’t say how America would react if the Republican Guard ship was touring off the coast of Washington D.C. That little skirmish added $1.00 to the price of a barrel of WTI oil on Thursday.

Turkey is back in the headlines. On Wednesday, they invaded Syria, with help from Uncle Sam in an all-out attack o Daesh strongholds. Turkey also used the opportunity to attack Syrian Kurdish forces, who are also US allies.

Russian President Putin responded to German Chancellor Angela Merkel’s accusation that Russia broke international law in Ukraine, by ordering snap military drills. Bloomberg reports that Ms. Merkel told reporters “NATO will stand together against any threats and are committing to protecting the Baltic nations”. She better fact-check that statement if there is a President Trump.

Believing in unicorns and oil production caps

Oil prices started climbing in February when traders believed that a Russian initiative to convince Opec nations to cap production would be successful. It wasn’t and WTI gave back a large portion of those gains. The same thing has happened this month. Opec announced an informal meeting in Algiers in September and traders heard “production cap”. The story heated up when Iran’s oil minister said that he would attend. Saudi Arabia put a wrinkle into the works on Thursday, when the energy minister ruled out a cut in production.

Rising production, abnormally high inventories in the US and the prospect of diminished global economic growth for the balance of the year should limit WTI gains.

Chart: WTI oil 4 hour

Source: Saxo Bank

The week ahead

This is the week that will rouse somnolent markets from their slumber. It has a bit of everything including reduced liquidity as it is the last week of summer vacation in many areas.

Monday will be busy with markets dealing with the fall-out from Janet Yellen’s speech. European markets will notice the absence of the UK due to Summer Bank Holiday.
Tuesday, a lot of Eurozone, German and US data should keep traders on their toes.

Wednesday should be an extra choppy session thanks a slew of European data releases including Eurozone CPI. It is also month end which means rebalancing flows can disrupt FX markets in the run-up to the 1600 GMT fix.

Thursday is PMI day around the globe although the impact from that data will pale in the face of Friday’s US nonfarm payrolls report.

The week that was

The Janet Yellen speech scheduled for late Thursday at Jackson Hole was expected to be the focus and lead to skittish FX markets. It was and it did.

Monday, Asia traders picked up on the hawkish Fed them again because of weekend comments from Fed Vice Chair, Stanley Fisher, which appeared to support the rate hike camp. The Bank of Japan governor verbally intervened in FX when he reportedly said that rates could be cut further. The US dollar traded sideways during the European and US sessions with light volumes.

Tuesday, the Reserve Bank of New Zealand governor, Graeme Wheeler surprised traders when he said that he only expected an additional 35 bps in rate cuts in 2016. NZDUSD rallied on that statement as traders had been expecting another 0.50 bps in cuts. The US dollar traded sideways in Europe and ignored PMI data. A report that Iran would not just attend the Algiers Opec meeting but consider price support ideas as well, set WTI soaring. The Canadian dollar rallied on the back of the move. The bloom was off that rose by the end of the day when the API Weekly Crude change reports showed a hefty gain. Sterling punched above 1.3200 as short position got shaved ahead of the Jackson Hole speech.

Wednesday was a slow day in Asia but picked up a bit in Europe. EURUSD came under pressure and USDJPY caught a bid. That theme carried on throughout the New York session. The over-riding influence was nervousness ahead of Janet Yellen’s speech on Thursday night. A weak EIA Crude stocks report sent oil prices tumbling, undermined the Loonie and gave US equity traders and excuse to sell.

Thursday was the same as Wednesday, slow boring and tedious. Even the release of better than expected US Durable Goods data just induced yawns. Oil got a boost on a report that a US Navy ship fired warning shots at an Iranian Patrol boat that had “got too close”.

Friday, the US dollar drifted lower in Asia and Europe and came under renewed pressure when New York started the day. US Q2 GDP was modestly lower at 1.1%, which was expected.

– Edited by Clare MacCarthy

Loonieviews 26Aug16


The wait for the Yellen to start

USDCAD Open (6:00 am) 1.2896-00 Overnight Range 1.2894-1.2921 26Aug16

FX-At-A-Glance

NOTE: This chart represents gain (or loss) of G10 currencies vs. the US dollar from NY close (4::00pm) to Aug 26, 6:00 am EDT

Finally, the day has arrived. Janet Yellen’s speech at Jackson Hole is scheduled for 10:00 am EDT. (8:00 am MT) Global markets have gotten themselves into a lather anticipating this speech and believe that they will finally get some guidance and clarity on US interest rate direction. They may be disappointed.

There are only 26 days until the next FOMC meeting and another nonfarm payrolls report due, as well. The July 27 FOMC statement said “In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal.” The US CPI report which was released following that statement, was unchanged.

.

The statement also said “ The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data”.

With that in mind, the uber-cautious Janet Yellen may not provide any more clarity than what was in the July FOMC statement . That will be a serious disappointment to FX markets.

.If Janet Yellen is doveish-USDCAD heads to 1.2750. If she says nothing new, USDCAD will trade within a 1.2850-1.3000 range. If she is as hawkish sounding as some of her colleagues were over the past few weeks, USDCAD will rally to 1.3100.

Overnight, the US dollar drifted modestly lower within narrow ranges. Sterling traders didn’t get very excited about UK GDP data which came in as expected (Q2 GDP prelim. Actual 0.6% vs. forecast 0.6%)

This morning’s release of US GDP may have the same impact as the UK data did which is not much ahead of the Jackson Hole speech

USDCAD technical outlook.

The intraday USDCAD technicals are bearish while trading below 1.2910 looking for a test of 1.2850. A break above 1.2910 targets 1.2950. Longer term, the well defined1.2650-1.3250 trading range that has contained USDCAD price action since May, is further supported by the uptrend line from January 2015, which comes into play at 1.2670.

For today, USDCAD support is at 1.2890, 1.2850 and 1.2810 Resistance is at 1.2920, 1.2960 and 1.2990.

Today’s Range 1.2850-1.2950

Chart: USDCAD daily

Loonievews 25Aug16


Come back tomorrow

USDCAD Open (6:00 am) 1.2910-14 Overnight Range 1.2900-1.2934 25Aug16

FX-At-A-Glance

NOTE: This chart represents gain (or loss) of G10 currencies vs. the US dollar from NY close (4::00pm) to Aug 25, 6:00 am EDT

Dull, humdrum, monotonous and mundane are a just a few words to describe the action in overnight FX markets. That is exactly the same description as the day before and it is more than likely how today’s North American session will turn out. Financial markets have decided that Janet Yellen’s speech, supposedly tonight around 7-8pm MT, will be the speech where she confirms or contradicts the hawkish comments by many of her colleagues in the past couple of weeks. Janet Yellen hasn’t confirmed (or denied) any such thing. She may believe policy announcements are best left to policy decision days and say nothing. If that is the case, the US dollar will tank.

Today’s US data may not be enough to spark much interest ahead of the Jackson Hole speech. Durable Goods Orders is expected to rebound and post a 0.5% gains vs. June’s -0.5% loss. Markit Services PMI is forecast to rise to 52.0 from 51.4 while Jobless claims should come in at 265,000. If the data comes in as expected, traders will go back to sleep.

Global equity indices drifted lower overnight, following the lead of Thursday US equity market close.

USDCAD drifted lower, despite soft oil prices, on the back of a weaker US dollar vs. the majors. There isn’t any domestic data today.

USDCAD technical outlook.

The intraday USDCAD technicals are bearish while trading below 1.2920 looking for a break below support at 1.2890 to extend losses to 1.2850. A move above 1.2925 will lead back to 1.2950 which if broken targets 1.2990. Longer term, the 1.2650-1.3250 trading range has been intact since the beginning of May and USDCAD is currently very close to the middle of that band. A doveish Fed and higher oil prices will drive USDCAD to the bottom while a hawkish fed and weaker oil prices will put the top in play.

For today, USDCAD support is at 1.2900, 1.2880 and 1.2850. Resistance is at 1.2930, 1.2960 and 1.2990.

Today’s Range 1.2890-1.2950

Chart: USDCAD daily

Loonieviews 24Apr16


Waiting for Janet

USDCAD Open (6:00 am) 1.2920-24 Overnight Range 1.2903-1.2951 24Aug16

FX-At-A-Glance

NOTE: This chart represents gain (or loss) of G10 currencies vs. the US dollar from NY close (4::00pm) to NY Open Aug 24, 6:00 am EDT

It was another overnight session where FX action was exciting as watching paint dry. A lack of major economic data and the Janet Yellen speech on Thursday evening at Jackson Hole is all the excuse traders needed to get back to playing Pokemon GO. USDCAD jumped in the Asia session following the release of the API Crude Stocks report showing a rise in inventories of 4..464 million barrels. The previous week had declined by 1.0 m/b. That rally ended when Europe walked in and USDCAD retreated back to where it was at the end of the day, in New York.

AUDUSD was under pressure in Asia due to general US dollar strength but it too, rallied during the European session. USDJPY see-sawed in a tight 100.00-100.25 range.

In Europe, EURUSD declined steadily while GBPUSD rallied. EURUSD sank in part due to position adjustments ahead of Janet Yellen’ speech on Thursday. GBPUSD rallied as traders trimmed extreme short positions.

All of the FX moves are occurring in an information vacuum and in thin trading conditions.

The wait for Ms. Yellen’s speech tomorrow, will ensure a dull day today. USDCAD traders will be waiting to see how the oil markets react to today’s EIA Crude stocks report. In addition, an earthquake in Italy and a US/Turkey offensive in Northern Syria will provide some distractions today.

USDCAD technical outlook.

The intraday USDCAD technicals have flipped back to bullish, supported by the move above 1.2930 and by the minor uptrend from the 1.2762 low, last Thursday. A break above 1.2980 is required to extend gains to the 1.3050-1.3070 resistance area. A move below 1.2850 argues for further weakness to 1.2760. In addition, the uptrend line from the June low of 1.2640 remains intact while prices are above 1.2760. For today, USDCAD support is at 1.2905 and 1.2880. Resistance is at 1.2950, 1.2980 and 1.3010.

Today’s Range 1.2910-80

Chart: USDCAD daily