CAD - Canadian Dollar
The Loonie versus the Greenback has been trading between the 1.3400 handle and 1.3423 since last Friday afternoon. The USD/CAD had a strong bounce (weaker Loonie) after the U.S. dollar index bounced strongly last Friday as weak U.S. CPI (core at 0 .1 percent versus 0.2 percent month to month) wasn't enough to move Fed expectations. Furthermore, market participants are expecting almost 100 basis points of cuts for the Fed rate in the U.S. The Loonie weakened with oil, which was down 4 percent after another strong crude inventory build of 2206k versus the -713.3k expected.
Retail sales will be released on on Friday. However, it seems that market participants are once again concerned, seeing the BoC as the only game in town and bringing more volatility. However, this Wednesday, we have the Fed rate decision in the U.S.
Technically speaking, the USD/CAD seems overbought at this point, which is the opposite of last week. The USD/CAD pair tested a resistance level last Friday of around 1.3423 and from there, it is losing momentum to the upside. Crucial significant support levels to watch today are the 1.3400 handle, 1.3390, and 1.3372. On the upside, a critical resistance level to follow is between 1.3417 and 1.3425.
The U.S.-China trade spat is making U.S companies send letters to the U.S. trade representative's office saying they have hardly any option besides China. Theory suggests it is difficult to have an idea on how the trade tensions between the U.S. and China will evolve. Also, market participants are jittery around the inflammatory rhetoric between the U.S., Iran, and the elections in the U.K. The AUD/USD and NZD/USD traded in a very bearish tone last Friday, and market participants are awaiting the minutes from the June 4th Reserve Bank of Australia meeting. The U.K. political drama continues to have a negative influence on the Sterling. Boris Johnson, who is on record for saying the U.K. should not be afraid of leaving the EU without a deal, is the leading candidate to replace Theresa May. The Loonie, in comparison with AUD, NZD, and the GBP, is just an observer, not a volatile currency, which might change after the Canadian CPI numbers.
Equity markets seem to be in a waiting mode with an optimistic bias today. In the fixed-income world, rates seem to be trading in a very pessimistic way. However, the FX market is very complacent, which in theory means that we should expect big moves sooner or later in the FX market.
Some sophisticated market participants such as BofAML expect the Japanese Yen to continue outperforming other major currencies. They also expect the BoC to be on hold this year, but they now expect it to cut 25 basis points in early 2020.
1.3373 - 1.3417 ▼EUR/CAD:
1.5045 - 1.5083 ▲GBP/CAD:
1.6798 - 1.6876 ▼AUD/CAD:
0.9153 - 0.9200 ▼NZD/CAD:
0.8710 - 0.8737 ▲