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USD/CAD Drops Sharply Following Stellar Canadian Jobs Report

#81
USD/CAD reversed sharply lower on the back of a strong Canadian jobs report to erase Wednesday’s gains that were inspired by a sharp drop in oil prices. The currency pair is testing important support that has held it higher since the May BoC meeting.

There were an additional 54,500 Canadian jobs reported in May which was well above the analyst consensus of 54,500 and marked the tenth consecutive monthly employment gain. The unemployment rate ticked up to 6.6% which was expected as the participation rate increased as well.

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USD/CAD forecast for the week of June 12

#82
The US dollar initially tried to rally against the Canadian dollar during the week, but rolled over a bit as the Friday announcement of a stronger than anticipated hiring of Canadian workers of course worked in favor of the Loonie. Looking at the longer-term charts, I still believe that we have a significant amount of support underneath, but we have not reached it yet. The uptrend channel has not been violated, and I’m waiting to see if we can find support below that we can start buying. Until we reach that level, I would have to think that there is a significant amount of bearish pressure that could get involved, but at the same time we have oil markets that are looking suspiciously soft. A bit of a rally in the oil markets may be coming over the short term, because they are bit oversold, but longer-term we have major issues when it comes to the idea of oversupply.



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CAD: BoC Wilkins Speech First Acknowledgement Next Move Is A Hike

#83
Today's speech by BoC's senior deputy governor Wilkins, noticing that markets zero in on her comments regarding the future path of monetary policy.

"The tone of the speech was more hawkish than recent communications by the Bank of Canada...While she subsequently noted that there continue to be indications of spare capacity in the Canadian economy, Wilkins concluded by saying that "Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required."

The hawkish nature of the speech is the first acknowledgement from the Bank that the next move is likely to be a hike.

While Govenor Poloz is still likely to take a cautious approach, today's comments cement our belief that the market had been underpricing the chances of policy tightening early in 2018 or even before that"

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CAD: How High Can CAD Fly With An October BoC Hike?

#85
This week saw USD/CAD mark one of its biggest one-day drops in the past year and this price action reflected a squeeze in market positioning and the rapid repricing of a BoC hike sometime in H2.

"The prospects of the Bank to remove excessive stimulus later this year favours a more upbeat outlook for CAD....We expect CAD to outperform in the dollar bloc as the RBA and RBNZ lag the BoC (and terms of trade favour energy) but we are cautious about extrapolating the rally beyond a select group.

Against the greenback, an H2 BoC rate hike will have to compete with our expectations of another Fed hike alongside balance sheet reduction"

All told, this backdrop favours selling the USDCAD on rallies but is also unlikely to see the pair make a convincing break below our expectations for a move back to 1.30 by year end"

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USD/CAD Struggles To Gain On A Stronger Dollar And Declining Oil Prices

#86
A turn lower in oil prices and a recovery in the dollar index (DXY) back towards two-week highs failed to spur a rally in USD/CAD which has been consolidating in a range throughout the day.

WTI crude oil prices (USOIL) recovered in early day trading to reach a high of $44.06 but a sharp turn in the North American session has triggered a bearish continuation with prices falling to fresh six-week lows. Oil prices trade at important support as the bottom of a declining trend channel has come into play as well as a horizontal level at $44.19 which is relevant on a weekly chart. The declining channel has contained price action from a high posted in February and had previously triggered the recovery ahead of the May OPEC meeting.

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USD/CAD forecast for the week of June 26

#89
The US dollar rallied during the week, bouncing off the 1.32 handle, and more importantly the uptrend line from the channel that has been so stringent over the last year. With the oil markets falling significantly, it makes sense that the US dollar should continue to strengthen if this continues to be the case, as the market should then go to the 1.35 handle. A break above there should continue to send this market towards the 1.37 level. Longer-term, I believe that the Canadian dollar has several issues, not the least of which is a well but you should keep in mind that currency traders tend to use this Canadian dollar market as a proxy for the crude oil markets.



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