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.
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.
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.
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.
No wonder French officials are calling for more ECB action
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.
The Canadian dollar was the best performer yesterday and today.
The euro jumped on the story.
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.”
Last year’s deficit was $680 billion.
The shortfall is due to slower growth. They see the economy 1.5% larger versus Q4 last year, a much slower pace than the 3.1% they forecast in February.
More from BBG.
Comments from Manuel Valls:
- Says the euro is overvalued
- Europe has room for more stimulative fiscal policy
- France needs to cut public spending but the pace can be discussed due to current “exceptional” circumstances
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.
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)
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.
Founded in 2008, ForexLive.com is the premier forex trading news site offering interesting commentary, opinion and analysis for true FX trading professionals. Get the latest breaking foreign exchange trade news and current updates from active traders daily. ForexLive.com blog posts feature leading edge technical analysis charting tips, forex analysis, and currency pair trading tutorials.
Find out how to take advantage of swings in global foreign exchange markets and see our real-time forex news analysis and reactions to central bank news, economic indicators and world events.
Our authors have years of experience in financial markets and provide diverse, thought-provoking updates relating to news about global macro events and the worldwide forex economic calendar, with frequently updated content that is educational for traders at all levels from beginner to novice that can help traders make better decisions about forex trading.
Our forex news focuses on G10 events, macroeconomic indicators, major equities indexes, treasury and bond yields from around the world, politics as it relates to forex trading and news from the FOMC as well as global central banks in, Europe and Asia.
Learn More About The Forex Live Authors Here and Follow us on Twitter, Facebook & Google+