Canada exempt from steel tariffs. USDCAD soft ahead of US and Canadian job reports. Large option expiry could come into play.

Summary

• USDCAD:  Dollar/CAD didn’t do much in NY trade yesterday, which was not surprising given all the event risk scheduled for this morning.  The market made another attempt above the 1.2920s into the London close but the move didn’t have much momentum and then we moved swiftly back below the level later in the afternoon as the Trump administration confirmed Canada’s exemption from the steel tariffs.  Similar to Wednesday, this left the market with another negative closing pattern, which has allowed USDCAD to leak lower in overnight trade.  Horizontal chart support at 1.2870 is holding once again and we have some more support underneath at 1.2850 at this hour.  Next up at 8:30amET are the Canadian and US employment reports for February.  Markets are expecting +21k jobs for Canada and +205k jobs for the US.  The consensus estimate for average hourly earnings in the US is +0.2% MoM and +2.8% YoY.  If USDCAD breaks support a 1.2850, there is not much further support until the 1.2770s.  Should USDCAD break back above the 1.2920, we would not be surprised to see the market attack the 1.3000 level as we have a large option expiry there at 10amET (now $1.6bln notional in size).  EURCAD had a very rough day yesterday, but it was all EURUSD driven as Mario Draghi dialed back the hawkish tone of the ECB’s latest monetary policy decision when speaking to reporters.  GBPCAD moved lower as well, as sterling followed the Euro lower, but buyers are trying to form a near term base here at support in the 1.7770s.

   

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Erik Bregar - Director, FX Trading

Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

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