Loonieviews 23Aug16


Loonie Rises as Oil falls

USDCAD Open (6:00 am) 1.2912-16 Overnight Range 1.2886-1.2947 23Aug16

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 23, 6:00 am EDT

The Canadian dollar appeared to defy gravity overnight and rose steadily despite oil prices trading down. Yesterday, USDCAD ended the day at 1.2955 and it had a bullish bias. WTI oil ended the day at $47.42 with a bearish tone. That relationship derailed in Asia. Oil prices continued to sink while USDCAD hit 1.2886 my mid-morning in Europe. The move coincided with a rally in the antipodeans, led by NZDUSD. Kiwi soared following a speech by Reserve Bank of New Zealand Governor Wheeler. He whined about the high level of the currency (as he usually does, and it was ignored) and then said “Our present judgement is that the current interest rate track, involving an expected 35 basis points of further interest rate cuts,..” FX traders were expecting at least another 50 bps in cuts. NZDUSD soared to 0.7335 from 0.7264

In Europe, Sterling, Euro and Yen all pared back Asia gains. Eurozone Markit PMI data was mixed. The August Composite PMI nudged higher to 53.3 from 53.2 while the August Manufacturing PMI slipped to 51.8 from 52.0. Still, reading anything into the overnight moves would be foolish as volumes are low and markets are hoping that Janet Yellen provides some guidance in her Jackson Hole speech, slated for Thursday around 5:00 pm EDT.

WTI oil dropped from $47.35 to $46.60 overnight and it is now at $46.85. A break of $46.50 would extend losses to $46.00 and if that level breaks, down to $44.80. The end of day release of the API Crude stocks report could be the catalyst for a move lower if it shows another large build in inventories.

FX markets are merely treading water awaiting Janet Yellen’s speech at Jackson Hole. Economists and analysts expect her to use that forum to announce or clarify the Feds interest rate outlook. However, there isn’t any evidence that Ms. Yellen has confirmed those expectations. She may just complain about the bad skiing conditions at the resort. Since her remarks won’t be available until after 5pm EDT, on Thursday, FX markets will trade sideways until then.

USDCAD technical outlook.

The intraday USDCAD technicals are bearish due to the overnight break below the uptrend line at 1.2950 and while trading below 1.2930. A move below the overnight low at 1.2986 targets 1.2840. On the other hand a break back above 1.2940 would test 1.2980. The reality is that this week’s intraday moves is merely noise until the Janet Yellen provides some clarity on US monetary policy. USDCAD remains locked within a 1.2600-1.3200 trading range. For Today, USDCAD support is at 1.2880 and 1.2840. Resistance is at 1.2950 and 1.2980

Today’s Range 1.2860-1.2950

Chart: USDCAD and WTI 15 minutes

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Author: Loonieviews

In the past 30+ years, I have been an FX interbank market making trader, a high performing FX and Derivatives Sales person, creator of simple and complex risk mitigation strategies and a manager of high performance FX teams. The Trade of the Day is a culmination of that experience. Retail FX traders have access to a well-crafted and carefully researched FX trade strategy designed to generate FX profits while mitigating losses.

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