By Andria Pichidi - July 10, 2019
Bank of Canada’s announcement is expected to result in no change in rates and a repeat of the data-driven mantra. Given that recent data has been consistent with their ongoing view that the economy is on the mend from the Q4/Q1 weakness, the takeaway should be for continued steady policy through year end. For example, the latest data was yesterday with Canada’s housing starts and permits showing a well-supported market through mid-year. Housing starts surged 24.8% to 245.7k in June after falling to 196.8k in May from 230.7k in April. The “trend” in housing starts (6-month moving average) improved to 205.8k in June from 200.5k in May. Meanwhile, the separate permit value measure plunged 13.0% in May after jumping 16.0% in April.
The BoC also releases the Monetary Policy Report alongside the announcement, followed by Governor Poloz’s usual Q&A with the press.
While the Fed and ECB have leaned dovishly recently, spurring market hopes for more easing, we do not expect the BoC to join the club. Recent economic data has come in close to the BoC’s expectations, tracking an improving economy. Trade uncertainty remains a hefty source of downside risk, but it is also a potential upside risk too (if/when the US and China finally reach an agreement). The currently accommodative policy setting is providing ample stimulus to an economy that is well into the recovery phase. Economic data is housing related this week.
Currency Market
USDCAD
rallied to 1.3140 yesterday, up from last week’s lows of 1.3036. The move came on general USD strength, which has been maintained since last Friday’s US jobs report, and on the lack of Oil price follow through gains. In June the USDCAD has dropped by nearly 530 pips, however in the long-term picture is following an upwards path, since August 2017 from 1.2060 lows. Despite June’s underperformance, the latest weekly doji candle along with the bounce this week above 200-week SMA, spread some hopes for a potential recovery of the pair. However, this scenario hasn’t been confirmed yet. A reversal to the upside could be suggested only if a morning star pattern is formed along with a move above 50-day SMA at 1.3240. Support holds at the bottom of the weekly channel and the June’s low at 1.3036. Intraday, Resistance holds at 1.3045-1.3060 (9-day high and 23.6% Fib. since May 31). Support is set at 1.3100.
The daily technical indicators are weak, as RSI and MACD have been configuring below neutral, however, they present slight strengthening of positive bias as RSI is at 40 from 31 low and MACD lines are above signal line.
USDCAD weekly and Daily
AUDCAD, on the other hand, broke the 8 years’ Support at the 0.9100 level, as bears look to be in full control this year. Currently it extends its Bollinger Bands further to the downside in the medium and long term charts, below 20- , 50- and 200-month SMA. Meanwhile, technical indicators have been negatively configured, as negative bias seems to get stronger and stronger. All the above suggest that the pair has a lot of downwards path to cover, while the break of the 0.9100 level opened the doors towards 2010 lows.
AUDCAD Monthly and Weekly
CADCHF has continued moving lower for a second consecutive day after the peak seen at 0.7611 on Monday. The move came in general on the anticipation of BoC statement. Overall, the CADCHF’s lookout remains positive with RSI sloping above 50 the past 2 weeks, while MACD spiked well above signal line within the positive territory. This suggests further positive bias in the medium term. In the near term meanwhile, the 2 days’ weakness looks to be a correction on the sharp rally seen since June 25, as the asset holds well above 20-, 50- and 200-day SMA but also the midpoint (50% Fib level) of the 2-weeks’ incline.
Support holds at 0.7535-0.7545 intraday and Resistance is set at 0.7572.
CADCHF Daily
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
Bank of Canada’s announcement is expected to result in no change in rates and a repeat of the data-driven mantra. Given that recent data has been consistent with their ongoing view that the economy is on the mend from the Q4/Q1 weakness, the takeaway should be for continued steady policy through year end. For example, the latest data was yesterday with Canada’s housing starts and permits showing a well-supported market through mid-year. Housing starts surged 24.8% to 245.7k in June after falling to 196.8k in May from 230.7k in April. The “trend” in housing starts (6-month moving average) improved to 205.8k in June from 200.5k in May. Meanwhile, the separate permit value measure plunged 13.0% in May after jumping 16.0% in April.
The BoC also releases the Monetary Policy Report alongside the announcement, followed by Governor Poloz’s usual Q&A with the press.
While the Fed and ECB have leaned dovishly recently, spurring market hopes for more easing, we do not expect the BoC to join the club. Recent economic data has come in close to the BoC’s expectations, tracking an improving economy. Trade uncertainty remains a hefty source of downside risk, but it is also a potential upside risk too (if/when the US and China finally reach an agreement). The currently accommodative policy setting is providing ample stimulus to an economy that is well into the recovery phase. Economic data is housing related this week.
Currency Market
USDCAD
rallied to 1.3140 yesterday, up from last week’s lows of 1.3036. The move came on general USD strength, which has been maintained since last Friday’s US jobs report, and on the lack of Oil price follow through gains. In June the USDCAD has dropped by nearly 530 pips, however in the long-term picture is following an upwards path, since August 2017 from 1.2060 lows. Despite June’s underperformance, the latest weekly doji candle along with the bounce this week above 200-week SMA, spread some hopes for a potential recovery of the pair. However, this scenario hasn’t been confirmed yet. A reversal to the upside could be suggested only if a morning star pattern is formed along with a move above 50-day SMA at 1.3240. Support holds at the bottom of the weekly channel and the June’s low at 1.3036. Intraday, Resistance holds at 1.3045-1.3060 (9-day high and 23.6% Fib. since May 31). Support is set at 1.3100.
The daily technical indicators are weak, as RSI and MACD have been configuring below neutral, however, they present slight strengthening of positive bias as RSI is at 40 from 31 low and MACD lines are above signal line.
USDCAD weekly and Daily
AUDCAD, on the other hand, broke the 8 years’ Support at the 0.9100 level, as bears look to be in full control this year. Currently it extends its Bollinger Bands further to the downside in the medium and long term charts, below 20- , 50- and 200-month SMA. Meanwhile, technical indicators have been negatively configured, as negative bias seems to get stronger and stronger. All the above suggest that the pair has a lot of downwards path to cover, while the break of the 0.9100 level opened the doors towards 2010 lows.
AUDCAD Monthly and Weekly
CADCHF has continued moving lower for a second consecutive day after the peak seen at 0.7611 on Monday. The move came in general on the anticipation of BoC statement. Overall, the CADCHF’s lookout remains positive with RSI sloping above 50 the past 2 weeks, while MACD spiked well above signal line within the positive territory. This suggests further positive bias in the medium term. In the near term meanwhile, the 2 days’ weakness looks to be a correction on the sharp rally seen since June 25, as the asset holds well above 20-, 50- and 200-day SMA but also the midpoint (50% Fib level) of the 2-weeks’ incline.
Support holds at 0.7535-0.7545 intraday and Resistance is set at 0.7572.
CADCHF Daily
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.