- CAD remains on the back foot
- Rate divergence trading supports USD
- Canadian wholesale sales for July disappoint
- BoC’s Poloz speaks in Calgary this afternoon
CAD dealers have had a helter-skelter ride over the past couple of trading session. Since early Friday trading Sept 18, dealers have had to navigate through a range of C$1.3013-$1.3280 with many wild swings in between. The loonies’ second failure below the C$1.3100 handle post-Fed rate decision on Thursday has certainly flagged some caution for the dollar bear.
The commodity and interest rate sensitive currency has been hurt mostly by crude price volatility. Inflation data for August held steady on Friday (CPI +0% m/m, +1.3% y/y, with core +0.2% m/m and +2.1% y/y) and had little direct impact on the currency. It seems that dealers would require a significant deviation from headline inflation for it cause any problems.
Despite gaining +0.3% versus its largest trading partner on the week, it has managed to back aggressively away from Friday’s intraday CAD high (C$1.3013) with relative ease. Even with crude oil benchmarks opening up +2% in early trade Monday, the loonie is finding it difficult to find any positive traction. The mighty dollar seems to be finding some solid support against G10 currency on rate divergence trading.
The loonie has even managed to pare its earlier gains (C$1.3182) outright on the back of positive crude prices being offset by disappointing domestic wholesale data. The value for July wholesale trade was unchanged versus market expectations of a +0.7% gain. More of a concern was the volume of wholesale sales was down -0.4% on the month.
The Bank of Canada (BoC) Governor Poloz makes an appearance in Calgary this afternoon (02.45pm EDT). He is due to speak about the commodity cycle and the Canadian economy (a text of the speech due to be released 15 minutes earlier than the speaking time listed). Keeping dealers somewhat occupied ahead of his speech will be a large C$1.3185 option expiry today, a reported USD $600m strike. The further the market moves away from the strike price the less interested dealers will become.
From a macro perspective, Canadian retail sales for July will be the only domestic data for this week.
From a technical perspective, USD/CAD bias is for an eventual test of C$1.3310 – triple matching high prints for September 7, 8 and 11. Through here should clear the way to test this year’s dollar high once again (C$1.3352).