USDCAD news - page 51
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CAD: Here Is Why USD/CAD Still Has Significant Upside Potential
The correlation between the Canadian dollar and USD is at its highest since 2011. yet the case for divergence is strong.
The Federal Reserve is two hikes into policy normalization while Bank of Canada (BoC) Governor Poloz left open the possibility of a rate cut last week amid a still large output gap and a US-driven tightening of financial conditions. The increased correlation suggests the market believes the coming US fiscal stimulus will equally benefit Canada. We would expect some positive spillovers, but other aspects of President Trump’s polices, namely NAFTA renegotiation and a border adjustment (BA) tax suggest underpriced macro risks that will continue to be a headwind for CAD over the course of 2017. Indeed, while the timing is uncertain, we see a BA tax as a strong tailwind for the US dollar.
In contrast, Canada’s high export and import exposure to the US leaves it particularly vulnerable, a factor that could weigh on CAD. As such, it is unlikely the BoC will be following the Fed in hiking rates anytime soon despite market pricing. Lastly, while oil prices are set to rise this year, the CAD-positive impact will likely be mitigated by a pickup in US production as well as a persistent current account financings issues, particularly as US yields rise.
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Greetings,
USD/CAD is close to zone with some buying interests and perhaps very soon the price will test 1.3050/60.
USD/CAD Recovery Subdued Following 200 DMA Break
USD/CAD bounced higher in trading on Thursday, driven by a stronger Dollar as the Greenback outperformed all of its major counterparts. The currency pair made a clear break of its 200-period daily moving average on Wednesday and the recovery today lost momentum on a retest of the indicator.
President Trump signed a deal earlier this week to reopen negotiations on the Keystone pipeline, renewing bearish pressure in the exchange rate. The shift in sentiment led to a daily close below the 200 DMA and has erased a bulk of last week’s gains that were inspired by last week’s Bank of Canada meeting. The absence of a late week bounce will negate last week’s bullish engulfing weekly print and puts the pair at risk of a break below last week’s low to signal a continuation to the downside.
The recovery in USD/CAD was based on a stronger Dollar as the trade-weighted index (DXY) bounced after hovering around the 100.00 level for most of the week. The index has regained the 100.18 level, a prior resistance point that held DXY lower in 2015 on two attempts. The next level of upside resistance falls at 100.74 and a breach would confirm a range break to set the stage for a broader recovery.
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Canada govt April-Nov budget -$12.66B vs +$1.03B a year ago
Canadian fiscal stimulus hits the bottom line
In November the deficit was $3.32 billion compared to a surplus of $392 million the year before.
USD/CAD forecast for the week of January 30, 2017
The USD/CAD pair fell during the week, testing the 1.30 level below. That’s an area that continues offer support, but the previous uptrend line continues to offer resistance. With this being the case, I feel that this is a market that is probably better traded off short-term charts, as longer-term trades will continue to be difficult to deal with. Pay attention to the oil markets, they have a massive influence on the Canadian dollar, as they are most certainly in a state of turmoil at the moment as traders trying to decide which direction to go.
USD/CAD Weekly Forecast January 30-February 3
USD/CAD dropped sharply in the past week to erase a bulk of the gains from the prior week. The pair was driven lower after President Trump announced his intentions to proceed negotiations on the Keystone oil pipeline project, a development that stands to benefit the Canadian economy.
The currency pair had started the week out with a bullish engulfing candle as the BoC meeting in the prior week sparked speculation that the central bank may further reduce its interest rates. The central bank had expressed concerns regarding trade agreements with the United States but the fundamental and technical developments from the past week have mostly negated the price action that resulted from the bank meeting.
The highlight in terms of economic data was the fourth quarter GDP release out of the United States. There was a rise of 1.9% in the past quarter, falling short of the analyst estimate for 2.2% growth and a reading of 3.5% in the prior quarter. The data, however, failed to have a sustained impact on the Dollar pairs.
There are several economic risk events in the upcoming week. The highlights include the Fed monetary policy meeting, US PCE index and the US jobs report. There will also be a speech by BoC Governor Poloz and any response to the oil pipeline and its repercussions on monetary policy will be important.
Wednesday’s Fed meeting will likely contain further uncertainty regarding Trump policies, similar to what was conveyed in the December Fed meeting minutes. There is little expectation for a rate hike in the upcoming week and the markets will be focused on communication surrounding the March meeting as a press conference is scheduled following the rate announcement. The futures markets are pricing in a 25.3% probability of a rate increase in March.
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Canada November GDP +0.4% vs +0.3% m/m expected
Canadian November GDP
Strong number and an upward revision to the prior. That's a big slice of good news for the Canadian dollar.
Details:
USD/CAD Threatens Break Of Psychological 1.3000 Handle
USD/CAD briefly traded below the 1.3000 handle today, weighed by stronger than expected GDP figures from Canada and a weaker US Dollar. The pair breached below the low set prior to Bank of Canada meeting earlier this month to print a succession of lower highs and lower lows from the late December peak.
Canadian GDP was reported to rise 0.4% in November to beat the analyst forecast for a 0.3% gain. The October data was revised to show a contraction of 0.2% from the previously reported 0.3% decline. The data triggered a sharp leg lower in USD/CAD with a weaker Dollar assisting the break below the 1.3000 handle.
The US Dollar index (DXY) spent most of last week consolidating near the psychological 100.00 handle but broke lower today, falling below last week’s low for a sustained break of the 100.00 handle. The index has been correcting lower from a high of 103.82 posted at the start of the month.
A steady decline in the Greenback has led to the currency leading the decliner’s list among the major currencies for the month of January. Among the commodity currencies, the Loonie has posted the least gains against the Dollar.