USDCAD news - page 27
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USD/CAD Forecast Dec. 21-25
USD/CAD posted sharp gains for a second straight week, gaining 220 points. The pair touched above the key 1.40 line and closed the week at 1.3955, its highest level since May 2004. This week’s key events are GDP and Core Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
After months of intense speculation, the Federal Reserve raised interest rates by 0.25 percent. The historic rate hike was not dovish as this small hike is just the start, with plans for additional hikes in 2016. Weak Canadian inflation numbers, and falling oil prices added to the woes of the Canadian dollar, as consumer inflation reports posted declines.
Updates:
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
USDCAD Daily Chart Dec. 21-Dec. 25
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If CAD Is Overshooting, How To Play It? - SocGen CAD at levels from where further weakness is going to look more and more like an overshoot, says SocGen.
"USD/CAD hasn’t traded above 1.40 since 2003. ‘PPP’ will never be a workable shorter or even medium-term FX trading tool, but Canada’s proximity to the US and the porosity of the border between the two does mean that when labour and goods are this much cheaper in Canada than the US, there is an economic impact," SocGen argues.
"As AUD/CAD heads back above parity, this remains an appealing 2016 short, even if no-one is going to want to position for that until the New Year or until the oil market quietens down a bit," SocGen advsies.
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USD/CAD: Pair Unmoved by US & Canadian Macro Releases Canadian GDP in October notably improved from -0.5% to 0.0% month-on-month, while the yearly change dropped from 0.1% to -0.2% in October.
The October growth was a big letdown, as flat figures came in below market expectations with gains in oil production being offset by weak manufacturing, utilities and retail.
In addition, Canadian retail sales in the same month jumped to 0.1% from -0.4% previously and the less autos gauge also accelerated higher from -0.4% to 0.0%, Statistics Canada advised on Wednesday. All four indicators came out below market estimates.
From the US dollar point of view, the US durable goods orders for November markedly deteriorated from 2.9% to 0.0%, while the ex transport gauge also slowed down to -0.1% from 0.5% previously. In addition, personal income in November decreased from 0.4% to 0.3% and personal spending ticked higher from 0.0% to 0.3%.
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USD/CAD Fundamental Analysis - December 28, 2015 The USD/CAD added 8 points as traders’ square positions ahead of the holiday. The pair is trading at 1.3856 after some better than expected Canadian data released late on Wednesday. The Canadian monthly GDP was flat month-on-month in October, below expectations, following a decline of 0.5% m-o-m in September as services are stagnating, while the goods sector continues to contract.
Moreover, these number suggests that growth in Q4 is likely to be close to 0% and could even be negative. This is well below the BoC’s forecast of 1.5% in the October MPR. While we believe that the forthcoming fiscal stimulus reduces the need for further monetary policy stimulus, the weakness in the Canadian data increases the probability that the BoC will need to cut rates next year.
Much of the market is bullish about the U.S. dollar in the next year but the currency may well surprise on the downside, according to an analyst. Oil prices, on the other hand, may bounce back as the current slump is largely due to the ongoing El Nino weather phenomenon that is causing a milder than usual winter. The overnight rise of oil prices is helping to support the Canadian dollar into the holidays.
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How Low Can The CAD Go? – Nomura The Canadian dollar suffered with oil prices but didn’t really recover when they recovered. What’s next?
Here is the view from Nomura:
“The Canadian dollar has depreciated significantly in recent weeks. Most of the depreciation can be linked to the further decline in oil prices and, to a lesser extent, to an increased probability of a rate cut by the BoC.Using our valuation model for USD/CAD, we estimate that USD/CAD should be closer to 1.35, given current commodity prices and rates differential.
We also look at the impact of various scenarios on USD/CAD fair value and find that commodity prices would need to decline by another 20% for USD/CAD fair value to increase above 1.40.
This suggests that, unless commodity prices continue to decline, further increases in USD/CAD are likely to be limited at this point, unless the Canadian economy falters. The Canadian dollar has depreciated sharply in recent weeks, losing more than 4% against USD, as oil prices continue to decline leading to a deterioration in the terms of trade. Moreover, a string of weaker data and the lower commodity prices have increased the market pricing of the probability of a rate cut by the Bank of Canada.”
Expecting a move to the upside this week...
Bank of Canada Governor Poloz is an x-factor in 2016 He's a tough central banker to handicap Here's a very brief summation of Poloz in 2015:
One the one hand, he is constantly, almost comically overly optimistic about growth coming to Canada and that the country will dodge the commodity collapse. On the other, he was way ahead of the curve when he cut rates.
So you can't really trust what he has to say but perhaps you can trust that he will do the right thing.
The OIS market is pricing in an 18% likelihood of a cut in January and almost 50% by July.
Loonie's 2015 Downfall: One of Worst Years on Record The USD/CAD pair reached new decade-highs in 2015, as the loonie struggled against weak energy prices, mild recession, and two Bank of Canada (BoC) rate cuts.
The loonie continued reaching new lows throughout 2015. The latest December plunge in oil prices brought the loonie to its knees, sinking it to C$1.3957 against the US counterpart — the lowest level since May 2004.
Overall, the currency has lost 17% of its value versus the greenback since the start of the year, according to Bank of Montreal chief economist Doug Porter. This would make it the second worst year on record. In 2008, during the financial crisis, the currency fell 18.6%.
Porter highlighted some of the main drivers behind the loonie’s poor performance.
"Oil prices, the divergence between Canadian and US monetary policies, a soaring US$, weakness in other commodity prices, and perhaps even some slight concern over Canada's return to deficits," Porter said.
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USD/CAD To Rise Toward 1.4200 - Citi Citi analysts expect that USD/CAD may rise toward 1.4200 for the coming 0-3 months.
"Since petroleum products are Canada’s major export, the persistent oil weakness may dampen Canada’s export income. This will likely be CAD-negative.
Besides, Citi’s Canada Economic Surprise Index plunged to -71.5 recently, the worst among major currencies, reflecting that economic data in Canada continues to trail market expectations. For instance, Canada’s Core CPI growth (MoM) moderated from +0.3% to -0.3% in Nov. GDP growth (YoY) fell from +0.1% to -0.2% in Oct," Citi argues.
On the technical front, Citi notes that USD/CAD continues to be supported by 20MA
"Technical indicators suggest USD/CAD may rise toward 1.4001-1.4200 upon consolidation, with support at 1.3721," Citi projects.
USD/CAD forecast for the week of January 4, 2016, The pair tried to rally during the course of the week but struggled at the 1.40 barrier, turning things around and forming a shooting star. Even though this is a very sign, we do not anticipate any type of break down from here of any significance, and fully recognize the 1.35 level as massively supportive. With this, we are either buying a supportive candle at lower levels, or a break out above the obvious resistance barrier at the 1.40 handle. We have no interest in selling this pair at all right now.