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USDCAD offered on bounce in US stocks + another positive NAFTA headline. Support levels, weak seasonals in focus. Big reports out Friday.

CXI April 3rd, 2018


  • USDCAD: It was a volatile Easter Monday session yesterday, with FX traders focused on the stock market for the most part.  China retaliated against the US with plans to impose tariffs on 128 US products.  Trump continued to go after Amazon.com.  US ISM came in below expectations, while the prices paid sub-component came in above expectations.  Liquidity was also at premium with Europe still out on holidays.  All this helped to fuel a swift sell off in stocks, which in turn brought a “risk off, safe-haven” type bid to the USD more broadly.  USDCAD bottomed at the 1.2870s once again and rallied all the way back up to familiar resistance in the 1.2920s.  Another attempt was made to push above resistance late in the session, but this failed as the S&Ps bounced 30pts off its lows and Trump came out with a NAFTA positive headline (wants to see a deal in 2 weeks).  This led to a lackluster NY close for USDCAD and gave traders an excuse to push the market lower overnight.  The move back lower overnight initially coincided with moves higher in AUDUSD, EURUSD and GBPUSD, but over the last few hours has been more a result of cross selling in EURCAD and GBPCAD.  Either way, we’re right back at the 1.2870s, which will once again be key level to watch for USDCAD today.  Next chart support is 1.2845-50, then 1.2810-15.  It’s going to be a quiet session ahead today for scheduled data releases, with just a couple of Fed speakers (Kashkari and Brainard), and so USDCAD traders will likely be focused on the stock market again and the broader USD tone.  Tomorrow sees the release of March US services ISM and US ADP employment reports.  Thursday brings the US Trade Balance for February.  And then of course we have the main event on Friday: the March employment reports for both the US and Canada.  There was a little hype making the rounds yesterday about the CFTC’s latest COT report and what it said for CAD futures positioning.  As of March 27, the market flipped to a net long USD (net short CAD) position for the first time since the summer of last year.  While significant changes to net positions usually warrant attention, we would put less stock in this change as it occurred over the March to June rollover, as evidenced by the massive drop off in open interest from 180k to 127k.  We view this positioning change the result of entrenched USD shorts (CAD longs) that simply did not rollover their positions come March expiry, and this in our opinion, is far less important than had it occurred at any other time.  Some talk is also making the rounds about April seasonals, which is traditionally the weakest month of the year for USDCAD (if we look back 20 years).  Just as we finish typing here, USDCAD has broken support and is testing the 1.2845-50 level.

Tune in @EBCTradeDesk for more real-time market coverage.


Market Analysis Charts

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Erik Bregar

Erik Bregar - Director, FX Trading

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