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2018-03-14 08:15

USDCAD resumes rally on dovish comments from Poloz. US Retail Sales and PPI on deck. Chart technicals supportive.

Source: EBC Trading Desk

Summary

  • USDCAD: It was an eventful session yesterday for USDCAD traders.  The US CPI figures were reported in-line with consensus estimates, but it appeared the market wanted more inflation because Fed fund futures up-ticked following the release (reducing the odds of a 4th rate hike from the Fed this year).  The broader USD saw some selling and USDCAD initially rejected the 1.2870 level we talked about in yesterday’s note.  Then Trump unexpectedly fired his Secretary of State, Rex Tillerson, and the USD saw another wave of selling.  This saw EURUSD spike to session highs and USDCAD to session lows.  Then Stephen Poloz from the Bank of Canada took the mic at Queen’s University and uttered some dovish opinions about the monetary policy outlook during his speech to students on “today’s labour market and the future of work”.  The key headline was this: BOC'S POLOZ: BANK TO REMAIN CAUTIOUS, DATA-DEPENDENT IN CONSIDERING FUTURE POLICY ADJUSTMENTS.  Needless to say, markets were surprised by this (considering last week’s neutral sounding BOC interest rate announcement) and so traders bought USDCAD en masse.  The market surged through 1.2870 and vaulted higher to the next resistance level (1.2920s) in short order.  USDCAD struggled there for a few hours and then resumed its march higher as the broader USD caught a bid and US stocks traded to new session lows (on China tariff fears).  Overnight trading activity has been extremely muted, but traders now have US Retail Sales and US PPI to look forward to at 8:30amET.  Chart support today checks in at 1.2925-1.2935.  Resistance is 1.2985 (yesterday’s NY high), and then 1.3005.  Canadian dollar futures traders added to positions for the 2nd day in a row yesterday (suggesting new USDCAD longs entered the market yesterday).  We think USDCAD trades range-bound to higher here given the lack of meaningful overhead chart resistance. 

     

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About the Author

Erik Bregar

Erik Bregar - Director, FX Trading

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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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Posted By Rachel Butler at 08:15 AM