The Canadian dollar starts out the week on a quite note, no economic new today, however, oil prices are a bit lower. Oil fell below $61 USD a barrel, on expectations that U.S. production will continue to grow and fill any void left by OPEC. Markets are still focused on whether there will be an all-out global trade war, Trump’s decision on steel and aluminum may be the beginning, as the EU has stated that it would respond in kind.
There is no real Canadian data this week, just manufacturing sales on Friday, whereas in the U.S., Wednesday’s retail sales and PPI could have impact on the USD.
Expect continued volatility.
USDCAD 1.2815, 1.2810, 1.2796 1.2838, 1.2850, 1.2857
USD-CAD has drifted lower after posting a nine-month peak of 1.3001 in the early part of last week, which capped a bullish run seen since mid January. The Canadian dollar has managed to find its feet on news that Trump will exempt Canada, along with Mexico, from his proposed steel an aluminium tariffs (though this will be temporary and subject to how the White House sees NAFTA negotiations go). We anticipate that USD-CAD will remain in a consolidation for now. Momentum indicators had been flashing “overbought” lately following a strong rally over the six weeks from sub-1.2300 levels.
EUR-USD ebbed back toward the 1.2300 level after lifting to a two-session high of 1.2340. Friday’s “just right” U.S. jobs report — strong jobs but soft average earnings — along with the cooling of tensions on the Korean peninsular have fed a risk-on vive in global markets, which in turn has been a backdrop weighing on the dollar, despite firming expectations for the Fed to make four 25 bp rate hikes by the end of the year. Market participants will continue to monitor the development of Trump’s tariffs. In the big view, EUR-USD has returned to midway levels of a range that’s been seen since late January, which marks a consolidative phase after rallying out of sub-1.1600 levels that were seen last November. Support is at 1.2275.