9 hours ago | August 27th, 2014 17:50:06 GMT

Canadian dollar on the warpath, rallies to highest since July

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Yesterday, USD/CAD rose to the highest level since April. Today it’s down to the lowest level since July.

The selling started on the break of the 200-day moving average and is now through the 100-dma and the August low.

USDCAD daily

USD/CAD daily

Yesterday I suggested selling GBP/CAD on the break of the 200-dma and the May low. That pair is now testing 1.8000.

Overall, nothing much has changed in the Canadian dollar landscape. The hype about the BK/Tim Horton’s deal is overdone. Canada isn’t an offshore tax haven and there will be no rush for companies to invert and move to Toronto. I get the sense that hedging flows, month end flows and technicals are the biggest part of the loonie rally today. That’s not the stuff that a long-term rally is built on.

6 Comments

10 hours ago | August 27th, 2014 16:28:07 GMT

Euro fading after pop on ECB speculation

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The euro has drifted back to 1.3190 after rising as high as 1.3210 on a report, citing ECB sources, saying that Draghi & Co are unlikely to take new action at next week’s meeting.

The fade underscores the market’s appetite to sell euros on any bounce. Even if the ECB stays sidelined next week, Draghi is likely to signal a program is coming and the exact timing is less important than whether or not it comes. Today’s revelation that Blackrock has been hired as a consultant on ABS purchases is a strong signal that it’s only a matter of time until the ECB is ready.

6 Comments

11 hours ago | August 27th, 2014 16:00:11 GMT

July French total jobseekers 3424.4K vs 3412.5K expected

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Highlights of the French Jobseekers report from the Labour Ministry.

  • Prior reading was 3398.3K
  • Net change 26.1K vs 14.5K expected
  • Prior net change was +9.4K

Fresh record high and another 26,100 people on the dole.

French jobseekers

No wonder French officials are calling for more ECB action

5 Comments

12 hours ago | August 27th, 2014 15:03:07 GMT

USD/CAD falls below 1.09

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The combination of the failure to break 1.1000 and month-end oil settlement flows are the likely drivers of USD/CAD weakness.

The pair has spent the entire month of August in the1.0860 to 1.1000 range.

USDCAD daily

USD/CAD daily

The Canadian dollar was the best performer yesterday and today.

10 Comments

12 hours ago | August 27th, 2014 14:29:04 GMT

ECB action unlikely next week without inflation slump – RTRS ECB sources

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The euro jumped on the story.

From Reuters:

The European Central Bank is unlikely to take new policy action next week unless August inflation figures, due on Friday, show the euro zone sinking significantly towards deflation, ECB sources said.

“The barrier to QE is still very high,” said one of the sources, all of whom requested anonymity, adding that discussion at the meeting was expected to centre on reinforcing existing policy measures of credit easing and liquidity provision.

“It’s hard to say now that nothing will happen. It depends to some extent on the data,” the source added.

Deutsche Bank earlier today forecast the ECB would announce QE via ABS purchases on Sept 4.

August advance eurozone CPI is forecast to rise 0.3% y/y and 0.8% on the core.

Update: Another comment in the story that’s getting some attention is a call for the euro below 1.30.

A second ECB source noted that Draghi’s Jackson Hole speech had helped lower the euro, which fell broadly on Wednesday and hit a 19-month low against the Swiss franc.

“If we get the euro under $1.30, that helps a lot,” this source said. “We need a weaker euro for a stronger Europe.”

13 Comments

13 hours ago | August 27th, 2014 14:06:44 GMT

BNP Paribas says to sell EUR/CAD

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Analysts at BNP Paribas recommend selling the euro against the Canadian dollar at 1.4380 (spot at 1.4359).

They target 1.38 and have a stop 20 pips above the 55-day moving average, which is at 1.4574.

Everyone hates the euro (and with good reason) but they’re selling against CAD because of “excessive” bearishness on the loonie.

0 comments

13 hours ago | August 27th, 2014 13:50:55 GMT

German 10-year bund yield falls below 0.90%

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German 10-year yields are down 4 bps to a record low 0.898%. They started the year at 1.96% and earlier in the month I wrote that the march was unstoppable.

Breakevens are collapsing and that’s a measure of deflation risk the ECB takes very seriously. The market is beginning to pile into bets on ECB QE next week or some other extraordinary move.

Only 40 basis points to go to match Japanese 10s.

German 10s vs Japanese 10s (spread)

German 10s vs Japanese 10s (spread)

3 Comments

13 hours ago | August 27th, 2014 13:41:24 GMT

S&P 500 narrowly higher at the open

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The S&P 500 is 0.95 points higher to 2001.05.

The index closed above the 2000 level for the first time ever yesterday and has risen in 10 of the past 13 sessions.

Month-end flows are a driver today. We could see some rebalancing or profit taking creep in with the index up 3.6% in August. I’d be cautious and anticipate yen strength if some weakness hits stocks.

2 Comments

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