Week in FX Europe – EUR’s Kiss Of Death From Ben
by Dean Popplewell, OANDA
Why is the CAD not any lower? Gold is off $60, crude is down $3 and Friday’s US data disappointed. As per usual, for an uninteresting currency that has been trading in a contained range so far this year, it is not surprising to witness a delayed reaction. The market should expect the loonie bears to come out of hibernation and finally want to sell some of their CAD dollars.
The currency bears will point to Gold’s long-term support levels been broken – there is danger that this move lower continues. The next real level of support for the yellow metal is around the $1475 area. It will be very interesting to see how the commodity bulls will react first thing next week.
There was no real news that sparked the Friday afternoon gold move lower. It feels like the commodity bulls finally lost interest and threw in the towel. Prudently, we should expect more investors to step aside so as to wait and see how far this market shake out progresses. Many have to be wondering what the logic is behind this move especially with central banks globally, and specifically Japan, ramping up the money printing.
With the lack of domestic developments, the CAD remains beholding to external headlines. With domestic order books remaining relatively thin topside, prices continue to find better bids on dips for now – however the game plan could change Sunday night.
- USD/CAD Reaches 1.01 on Demand for Riskier Assets2013–04–07
- US Budget Deadlock Dissolving2013–04–07
- Economists see 3% US growth for 20132013–04–07
- Obama to Send to Congress 3.7 trillion budget2013–04–07
- World Trade Organization Cuts 2013 Trade Forecast2013–04–07
- Bill Gross buying up Treasuries
- Risk of Fourth Summer Slump for U.S. Fed2013–04–07
- Global Economy is in for Another Tricky Year2013–04–07
- Strategists Are Bullish on the U.S. Dollar2013–04–07
* CNY Real GDP
* AUD RBA Policy Meeting Minutes
* GBP Consumer Price Index
* EUR Euro-Zone Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* USD Consumer Price Index
* NZD Consumer Prices Index
* GBP Bank of England Minutes
* CAD Bank of Canada Rate Decision
* USD U.S. Federal Reserve Releases Beige Book
* CAD Consumer Price Index
With no North American data to bully the loonie on Friday, the interest and commodity sensitive currency ended the week trading rudderless in another tight boring range. Many investors have shifted their attention to the euro-zone developments. Last Thursday, the 2013-14 Canadian budget was delivered amid little fanfare and with no impact on the CAD. The only thing of note was the reaffirming of Canada’s Triple-A credit rating, a recognized seal that is quickly becoming a rare attribute bestowed on developed countries.
After last weeks employment numbers, many investors were positioned and expected some modest bullishness from the currency. In hindsight, domestic macro drivers have been too mixed to give the loonie clear direction. Several analysts believe the divergence between Canada’s services and manufacturing sector will end up being temporary. With Canadian households remaining cash rich and a banking sector amongst the strongest globally, certainly favors the currency. Once the unknown Cypriot variable is played out and remains contained, the loonie should finally break out of its current range. For now, the sideways chop continues with range trading being the best strategy.
- Lets not forget about Sequesters: House on track to pass deep cuts to budget
- Bernanke Says Fed May Alter Bond Buying
- Sales of Existing U.S. Homes Have Likely Climbed to Three-Year High
- Bernanke Reassures Markets Easing to Continue
- New US Home Rise in February
- Canadian Manufacturing Sales Drop 0.2 percent in January
- Bernanke Gets Hold of Fed Messages
- QE’s Impact Coming to an End
* USD Fed’s Bernanke Speech
* USD Durable Goods Orders
* USD Consumer Confidence
* GBP Gross Domestic Product
* CAD Bank of Canada Consumer Price Index Core
* EUR Unemployment Change
* USD Gross Domestic Product
* USD Reuters/Michigan Consumer Sentiment Index
No one was close to reporting the North America jobs numbers. Canada and the US headlines blew all forecasts out of the water, and for the time being have convinced the market that they need to buy North America.
Both countries’ released improved unemployment rates. The downtick to the US unemployment rate to +7.7% from +7.9% can partly be attributed to Americans dropping out of the workforce. Analysts note that the participation rate fell to +63.5% last month from +65.6%, which is now officially the lowest rate in 33-years. This is probably the only obvious knock against this months NFP release. On the surface, it’s not a very healthy way to achieve a jobless rate decline and it will be used as fodder for the pro-stimulus members at the Fed.
The +51k busting print for February from the Canadians is very much a showstopper. However, it’s worth noting that their job survey is usually very volatile because of the much smaller sample. The fulltime print of +33k new jobs has the loonie ‘strutting’ on the crosses with very little been given up.
CAD is dominant in EUR/CAD, CAD/JPY and against its commodity cousin the AUD. Along with the stateside job numbers, the release provides a good bullish argument to want to own the loonie now that the rate dealers have priced out any chance of a Central Bank rate cut this year after the BoC meet in mid-week. Now we have to wait and see if momentum is carried over into next week.
- Loonie Rallies As Employment Numbers Beat Street
- All except 1 Bank Passed Fed’s Stress Test
- US Trade Deficit Rebounds in January due to Oil Imports
- Obamacare Is Costing Jobs and Sales Says Beige Book
- USD/CAD Moves to 1.0320 Central Bank Says Rate Appropriate
- US Orders for Goods Fall 2 percent in January
- US Treasury’s Fall: Equity Gains Dampen Insurance Demand
- U.S. Dollar Remains Lower Versus Majors Before Beige Book
- Talks Continue on U.S. Spending Cuts
- Dollar Index Trades Near 6-Month High
- ‘Avoid Currency Intervention’ U.S. Tells G–7
- Managed Exchange Rates Create Tension Says US Treasury Official
- US and China Strike Tentative Deal on North Korea Sanctions
- US 10′s Under Pressure on Speculation Services Expanded
- WTI Crude Rebounds From 10-Week Low
- Obama Offers Medicare and Social Security in Latest “Grand Bargain”
- No Progress on Sequestration Talks
* JPY Japanese Parliament Vote on BoJ Governor Nominations
* EUR German Consumer Price Index
* USD Advance Retail Sales
* NZD Reserve Bank of New Zealand Rate Decision
* AUD Employment Change
* CHF Swiss National Bank Rate Decision
* USD Producer Price Index
* EUR Euro-Zone Consumer Price Index
* USD Consumer Price Index
Week In FX Americas – The “Fright Flight” of the Loonie
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