Heisenberg_Fx
Short

EURCAD Short Idea

FX:EURCAD   Euro Fx/Canadian Dollar
27 1 1

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Heisenberg_Fx
2 years ago
CAD(Bullish)
Central Bank Rate: 1.00%

BOC Summary

BOC has previously been dovish but lately they have began sounding more neutral.
Inflation data has been improving which has caused a sell off in the USDCAD from its fair price down to yearly lows but it has since returned back to its fair price.
BOC dismissed improvement in recent statements and claimed that figures will start to become more bearish from here prompting weakness in the CAD.
Markets will now watch employment figures closely as BOC mentioned these were big part in keep economy down. we need to see these improve before CAD will.


Key Indicators To Watch
CPI Inflation(Target 1-3%)
Fundamental Data

Last Week Fundamental Releases
Manufacturing Sales m/m - Actual: 2.5% Forecast: 1.1% Previous: 0.9%

Manufacturing Sales have continued to increase basically every month this year and just printed out its largest gain this month
This is strengthening the currency by quite a bit.

BOC Gov Poloz Speaks

Reiterates they are aiming to keep inflation at 2%, mid point of their 1-3% target.
They want to keep inflation low(basically currency down) but BOC says they will not try to do anything to step in as this could cause the market more harm than good.
Overall he saying to focus on the Data to understand where the cad is going.

Core CPI m/m - Actual: 0.5% Forecast: 0.2% Previous: -0.1%

Core CPI crushed forecast and previous months numbers showing inflation(which is good for currency)
Core CPI has continued to increase almost every month this year so this huge increase should greatly strengthen CAD

Wholesale Sales m/m - Actual: -0.3% Forecast: 0.8% Previous 0.8%

Overall wholesale sales have increased every month this year except for 3(including this month). This shows that the trend is up/growing.
This miss being the 3rd time it has decreased this year I am not too worried and look at it as a breather or a slight dip in the overall bullish trend.

CPI m/m - Actual: 0.0% Forecast: -0.1% Previous: -0.2%

CPI numbers were better than expected this month. That being said the CPI did not increase.
CPI has increased every month except for 2 this year so the overall trend is up.
Even though CPI did not increase this month it is still very bullish as it appears to just be taking a breather.


Weekly Fundamental Summary
All of the fundamental data coming from CAD this week was bullish and I expect it to be bullish. BOC is being more neutral than anything saying they want to maintain a low inflation rate of the CAD but will not necessarily step in to do so and instead will let the Data run its course. That being said as long as CAD data continues to be strong I expect it to continue to be strong as well.


Overall Summary
Overall the data coming from the country is mixed since the inflation numbers are good but BOC is focusing on employment numbers being bad. With the BOC saying they won't necessarily step in to keep the CAD lower it will likely increase as long as the data continues to be good.


EUR(Bearish)
Central Bank Rate: 0.05%

ECB Summary

The ECB is mainly focused on inflation rates because it is below their 2% mark. the main a central bank increases inflation is by cutting interest rates. ECB just cut interest rates again for the second time this year.
A Strong Euro, stagnant growth and the missed inflation has caused the EU economy to struggle in its recovery and it is now obvious that they are lagging behind the rest of the world in this manner with negative interest rates.
ECB rates are currently negative. this means we need to pay to hold the euro as a long position. all these factors are making the EUR very bearish.

Key Indicators To Watch:
Inflation(Target 2%)

Last Weeks Fundamental Releases
German ZEW Economic Sentiment - Actual: 6.9 Forecast: 5.2 Previous 8.6

Has decreased Month Over Month since 2014.
It appears that the downtrend is finally starting
to slow. Before it would miss by double digits every month. This time it only missed by single digits.

Targeted LTRO - Actual 82.6B

The European Central Bank has today allotted €82.6 billion to 255 counterparties in the first of eight targeted longer-term refinancing operations to be conducted between September 2014 and June 2016. The programme is designed to enhance the functioning of the monetary policy transmission mechanism by supporting bank lending to the real economy.
This is to further their efforts to keep money in the economy and out of the banks.
Good for the economy, and should strengthen EUR but not till it is further along with the program. I think by the 4/8 LOTRO's are done we will start to see real turn around on EUR.
The second TLRO, as previously communicated, will be announced on 9 December and allotted on 11 December.

Current Account - Actual 18.7B Forecast: 14.3B Previous: 18.6B

Not majorly important but this will strengthen the currency a tad as their is a surplus instead of a deficit


Weekly Fundamental Summary
The ECB is taking further steps to get money out of the banks and into the economy to promote a recessions and it looks like the ZEW sentiment indicator is finally starting to see a slow down to the weakening economy.

Overall Summary
The central banks current policies were not having the effect they would have liked so they decided to cut rates into the negatives so it now cost money to hold your cash in the banks overnight. This sounds scary but the reason they do this is because they dont want the banks to just be hoarding all of their cash, this encourages them to loan it out into the economy to help it recover instead of just holding on to it and paying fees.

After last weeks news events I wont be surprised to see the EUR’s down trend begin to slow & start searching for a bottom. That being said I would still look to see against stronger currencies but will only be looking for singles, not homeruns.
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