USDCAD – Back to 1.2500?

USDCAD – Back to 1.2500?

Chart Of The Day

Yesterday’s dovish BOC statement send USDCAD back above the 1.2600 figure -- a move that no doubt pleased the Canadian monetary officials who want to see the value of the currency remain relatively low. But the rally could be short-lived if the data continues to surprise to the upside.

Tommorrow the market will get a look at CPI and Retail Sales Reports and although both datasets are projected to be a bit lower than the month prior and upwards surprise could send USDCAD back to a retest of the 1.2500 level. Despite Governor Poloz’s caution, the central bank has not ruled out the prospect of another rate hike in May, and some analysts continue to believe that the BOC will act.

Furthermore, with oil prices within a dollar of the key $70/bbl mark, the Canadian economy could absorb a rate hike with relative ease so the loonie could still have some juice left in the trade if the data provides the catalyst.

USDCAD – Back to 1.2500?

USDCAD – Back to 1.2500?

Chart Of The Day

The loonie has been a persistent loser for the past six weeks as the Bank of Canada did an abrupt about-face and turned resolutely neutral after surprisingly hawkish since the summer. After hiking rates not once but twice, the BOC saw its currency appreciate too much for its own liking and saw CAD data deteriorate at the start of Q3.

Lately, however, the Canadian economy has shown strong signs of rebound. Employment, Building Permits, Ivey PMI have all beaten forecasts while oil popped above the $50/bbl level and has remained there for several weeks.

Tomorrow the market will get a look at Canadian inflation data, which has been tepid at best running at about 1.5% per annum. However, if the CPI proves to be hotter than expected, that could shift BOC towards a more hawkish posture and spark a selloff in USDCAD towards the 1.2500 figure.

USDCAD – Back to 1.2500?

USDCAD – Back to 1.2500?

Chart Of The Day

The loonie remains one of strongest currencies in the G-7 universe aided today by better than expected Retail Sales numbers which saw a jump of 0.7% versus 0.1% eyed. The economy up North continues to hum along despite lack luster oil prices as diversified services base delivers robust growth.

After a mild counter-trend rally USDCAD looks like it’s to test the key 1.2500 support level and tomorrow’s crude inventory numbers could be the catalyst for such a move. If the inventories show a larger than expected draw oil could climb towards the key $50/bbl level providing just the push that loonie needs to test 1.2500 support.

For now, the pair remains comfortably above that level, but a move lower could ultimately send it to a test of recent lows at 1.2419

GBPUSD – 1.2500 Breakout?

GBPUSD – 1.2500 Breakout?

Chart Of The Day

After months of decidedly dour news, cable bulls finally git a shot in the arm today with news of a court ruling that will likely force the government of PM May to take the Brexit issue to a Parliamentary vote. A final appeal is scheduled on the first week of December but the ruling will likely be upheld.

It’s unclear whether in the end this will make much of a difference with regard to “hard Brexit” but at least for now it slows the process and puts enough of a doubt in the minds on investors to possibly go bargain hunting with cable.

On the economic front the news continues to be positive with latest PMI Services report showing steady improvement and the Bank of England no longer holding a very dovish posture towards monetary policy. All of this adds up to a possible rally in cable as the pair has now carved a strong level of support in the 1.2200-1.2400 zone and could break the key 1.2500 level to truly bust out to the upside targeting the 1.2700 pre flash crash level.

USD/CAD – 1.2500 in View?

USD/CAD – 1.2500 in View?

Chart Of The Day

The deal between Saudi’s and Russians has given oil a boost as crude finally took out the $40/bbl level and soared to $42/bbl by the close of NY trade. The news has certainly proven to be a shot in the arm for loonie which tumbled below 1.2800 taking out long term support from last year.

Tomorrow the pair may be pushed lower still on the back of the BOC rate announcement. While the central bank is not expected to make any policy changes, it is likely to reiterate its neutral stance with Governor Poloz reaffirming that the bank will not cut rates any further. With Canadian labor picture surprisingly resilient and with oil price now stabilizing at the $40/bbl level USDCAD could see 1.2500 in the near term as momentum pushes it further down.

USD/JPY – 125.00 Next?

USD/JPY – 125.00 Next?

Chart Of The Day

Tomorrow is NFP day and like always markets will glued to the figure to gather an understanding of the health of the US economy. However tomorrow the number takes on a particular importance because it may finally convince the Fed to come off the zero bound standard and hike rate at the next meeting in December.

Any number above 200K will likely light a fuse under USD/JPY and push the pair through it key resistance at the 122.00 level. The pair has been in a virtual standstill for three months as it consolidated in 119.00-121.00 zone biding it time. But if Friday’s news causes an upside breakout the next target could be the multi year triple top at 125.00 as the pair awakes from its slumber.

USD/JPY – Will FOMC Push It to 125.00?

USD/JPY – Will FOMC Push It to 125.00?

Chart Of The Day

Tomorrow all eyes will be on the FOMC meeting which promises to be the marquee economic event of the week. The key question for the market is whether the Fed will hint that its ready to hike rates in September or delay any action until December.

The economic data has been mixed with labor numbers continuing to impress, but wage growth and consumer sentiment lagging. In fact today’s consumer sentiment drop was one of the steepest in recent memory and bodes poorly for future spending. That’s why the market is at a standstill and nowhere is that reflected more clearly than in USD/JPY which has been ranging between 123.00 and 124.00 for the better part of this month.

If the Fed does signal a willingness to hike the pair could snap out of its slumber and take out the key 125.00 level on it way to retest the recent swing highs. On the other hand if the Fed continues to equivocate than USD/JPY could tumble towards 122.00 as speculative long bail out of the pair

USD/JPY – Back to 125.00?

USD/JPY – Back to 125.00?

Chart Of The Day

After a much needed correction USD/JPY is looking bid again and the pair could be headed to retest its recent highs near the 125.00 level if the US data proves to be supportive over the next few days. The pair got a boost from FOMC member Powell today who surprised the market by suggesting that the Fed could hike rate not once but twice before the year end. That seems like a stretch, but it does show that many of the FOMC members are eager to normalize rates and that means the dollar will get bid again.

On the news front the US calendar will see the final US GDP reading and if there any improvements in the data that should help push the pair higher as growth was one of the key concerns in Fed Chair Yellen’s presser last week.

Technically the pair has firm support at 122.50 and sees resistance at the recent highs at 125.00-125.50 region.

USD/JPY – 125.00 in View?

USD/JPY – 125.00 in View?

Chart Of The Day

Nothing has participated in the dollar rally more than the USD/JPY pair which hit fresh 8 year highs this week. As investor sentiment grows ever more bullish on prospect on rate hikes this year the pair is sure to be the primary vehicle for dollar gains.

But having come so far so fast the pair may be overbought and vulnerable to some profit taking. Today’s price action which saw a sharp selloff despite good US data is emblematic of near term exhaustion. Tomorrow however, the market is going to get a look at Q2 Preliminary GDP and if the data is better than the anticipated -0.8% q/q contraction then USD/JPY could resume its upward trek as expectations of rate hike as early as June will begin to build.

Technically the pair has support at the 122.00 level and a break above 125.00 opens the prospect of run all the way towards 130.00 figure.

USD/CAD -Will 1.2500 Cap the Rally?

USD/CAD -Will 1.2500 Cap the Rally?

Chart Of The Day

The loonie has weakened markedly over the past few days as the dollar rally left no pair untouched. Canadian data has actually held up pretty well and price of oil continues to stabilize around the $60/bbl level -- but none of that mattered as the hawkish rhetoric from the Fed pushed the pair from 1.2200-1.2400. One other reason for the loonie weakness was the cooler than expected CPI readings.

That is why tomorrow’s BOC meeting will be of interest to the market. If Governor Poloz confirms that the central bank sees no price pressure whatsoever the loonie could wobble further and the pair could push through the 1.2500 level. However if he insists that its transitory then the USD/CAD run may be over and the pair could consolidate at these levels.

Technically the pair has resistance the at the 1.2500 level, but a break through there opens a run to 1.2700 while a failure could set in a double top and a move back to 1.2000.

EURUSD – Back to 1.2500?

EURUSD – Back to 1.2500?

Chart Of The Day

Fundamentals

The EUR/USD saw a steep selloff today as rumors circulated in the market that at least 11 banks will likely fail the ECB bank stress test results due this Sunday. The pair drifted all the way to 1.2637 by end of day. However, the decline today could pale in comparison to what could could happen tonight. The worries about the financial sector are overblown as the banks in question are small regional players and are unlikely to have much impact on the European banking system. The much more important factor is economic growth and to that point tonight’s flash PMI data will provide the most accurate reading of conditions on the ground. If PMI show a steep decline and more importantly if the data shows that Germany has moved into contraction then EUR/USD could retest its lows at 1.2500

Technicals

The drop in EUR/USD below the 1.2650 level now opens a run towards the 1.2500 double bottom test and only a move above the 1.2800 figure relieves the downward pressure.