USDCAD surges yesterday. Saudi Arabia begins selling Canadian assets. Weekly oil inventory data on deck.

CXI August 8th, 2018

Summary

USDCAD: Dollar/CAD is bid this morning after a scorching rally yesterday that caught many off guard. Some chalked it up to the weaker than expected Canadian PMI print; some blamed it on a delayed reaction to the Saudi Arabia/Canada diplomatic spat over the arrest of a female activist, and some blamed it on flows from big funds. Either way, USDCAD regained the 1.2970s (which it lost early yesterday), blew through trend-line channel resistance at 1.3025 and quickly tested resistance in the 1.3070s. Overnight action has been supportive for the most part, with USDCNH strength and crude oil weakness in Europe providing a broad USD bid. We now enter NY trading to headlines that Canadian Building Permits missed expectations for June (-2.3% MoM vs. +1.0% expected) and Saudi Arabia has instructed their overseas asset managers to dispose of their Canadian equities, bonds and cash holdings “no matter what the cost”. The Financial Times is also now reporting that this selling began yesterday (which neatly explains yesterday’s USDCAD move). More here: https://www.ft.com/content/b33505ba-9aff-11e8-9702-5946bae86e6d. USDCAD has punched above the 1.31 handle in response but has since settled back down to levels before the Saudi headlines crossed. We think the market cools off here a tad given the market has rejected resistance here despite a number of CAD negatives. Next up is the weekly crude oil inventory data at 10:30pmET (expectations are for a draw of 3.3mln barrels). Tomorrow features Canadian Housing Starts and US PPI.

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Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

September Crude Oil Chart

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