Canadian Dollar Struggles to Rally

The Canadian dollar is struggling to rally despite West Texas Intermediate (WTI) oil prices flirting with $50.00 per barrel.  USDCAD poked above 1.2700 on Monday, in holiday thinned trading and then spent the rest of the session drifting lower.  The currency pair was virtually ignored overnight as it traded in a 1.2653-1.2680 range.

The Canadian dollar has ignored a slew of positive economic reports from last week which culminated in the strong employment data on Friday.  Other strong economic reports included Markit manufacturing PMI, Industrial Production, and Auto Sales.

The Canadian dollar weakness stems from chatter in some circles that the Canadian dollar rally since June 12 may have run its course.  Speculative positioning flipped from stretched short Canadian dollar positions to large long Canadian dollar positioning, which may be limiting more USDCAD losses.

The lack of actionable, Canadian or US economic data releases today suggest that FX trading activity will be quiet.

If Monday’s trading action was in slow-motion, Tuesday’s was stop-motion.

In Asia on Monday, NZDUSD was under pressure after Q3 inflation expectations fell and it stayed soft today.  The RBNZ policy meeting is Thursday.

China’s Trade report was weaker than expected the Trade Balance widened to $321.2 billion year over year.   Exports declined 7.2% (forecast 10.9%) and Imports dropped 11.0% (forecast 16.6%)

USDJPY traded sideways in a narrow range Monday and Tuesday.  If the chart was an emergency room heart monitor, nurses would have called the morgue.

EURUSD wasn’t much better but traded with a bid.  Germany’s trade surplus widened but exports declined.

Sterling stayed on the defensive following the drop from last Thursday’s peak of 1.3265 and traded in a 1.3015-1.3055 range.  Even higher BRC Like-for like-Retail Sales didn’t give lasting support.  Diminished rate hike expectations and Brexit issues have weighed on the currency.

Oil prices have been whippy.  WTI bopped and weaved inside a $48.52-$49.76 range.  News that Saudi Aramaco will cut allocations to its customers by 520,000 barrels per day in September gave WTI a bid today.

FX Ranges for major currency pairs

open Open High Low
7-Aug-17 8-Aug-17 Range Mon.-Tues.
EURUSD 1.1802 1.1809 1.1823 1.1782
USDJPY 110.83 110.54 110.90 110.55
GBPUSD 1.3053 1.3031 1.3055 1.3015
USDCHF 0.9730 0.9732 0.9736 0.9719
AUDUSD 0.7907 0.7928 0.7947 0.7900
NZDUSD 0.7356 0.7361 0.7413 0.7315
USDCAD 1.2650 1.2661 1.2710 1.2630
GOLD 1256.95 1261.04 1261.18 1257.31
WTI 48.90 49.74 49.92 48.49

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