USD/CAD. Two tests for the loonie

Trading 07 oct 2020 Commentaire »

The Canadian dollar paired with the American namesake can not determine the vector of its movement. By and large, this trend is inherent in almost all dollar pairs of the major group: traders react to the current news flow, but do not dare to make long-term investments. Therefore, after short-term fluctuations, currencies return to their previous positions. This pattern has been observed for several days, and the USD/CAD pair is no exception.

So, the loonie has been fluctuating in a relatively small price range since the beginning of October, the borders of which correspond to the levels of 1.3250-1.3310. All the ups and downs of the loonie are limited to this range. But the events of the next few days may stir up traders, provoking increased volatility. In particular, Bank of Canada Governor Tiff Macklem will speak tomorrow, and the Canadian Nonfarm payroll report will be published on Friday - key data on the labor market. This means that the Canadian dollar will either receive support or be under pressure from negative fundamental factors by the end of the current trading week.

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In my opinion, the Canadian dollar has all the prerequisites for its recovery. Undoubtedly, the US dollar plays the role of the first violin in the USD/CAD pair, but it has recently demonstrated its vulnerability. Therefore, if the US dollar index continues to drift at its previous positions (in the area of 93 points), then the Canadian will be able to show character and seize the initiative on the pair. In other words, if the greenback does not strengthen throughout the market, then the vector of the USD/CAD movement will depend on Canadian events in the medium term.

Macklem is set to speak on October 8. He will deliver a speech at an online conference hosted by the Global Risk Institute. The topic of the conference is not directly related to the prospects of the country's monetary policy, but still the head of the Canadian central bank can comment on the latest macroeconomic reports in this context.

By and large, Macklem has no clear and weighty cause for concern as of the moment. Thus, According to the latest data, the volume of Canada's GDP increased by 3% (on a monthly basis), while the overall forecast was at 2.9%. At the same time, positive dynamics was recorded in all 20 industrial sectors. The Canadian economy has been growing for the third consecutive month, although the pace of recovery has somewhat slowed down relative to the first post-crisis months.

The latest inflation figures did not disappoint, although they fell slightly short of the forecasted values. The core CPI, which excludes food and energy, rose 0.8% y/y while the forecast was 0.9%. The general consumer price index came out at the level of the previous month (+ 0.1% y/y), although the forecast was slightly higher, + 0.4%). That is, in general, inflation is showing growth, albeit at a rather weak pace.

By the way, in September there were rumors that the Canadian central bank might duplicate the new strategy of the US Federal Reserve. Let me remind you that the Fed announced that inflation must now exceed the two percent target (and not close to it) before the central bank raises the interest rate. In other words, the Fed has extended the time period during which record low rates will be maintained. The Bank of Canada has recently started to voice a similar rhetoric. Thus, according to

Senior Deputy Governor Carolyn Wilkins, alternative instruments of monetary policy "may include targeting average inflation, targeting the price level, a dual mandate to increase employment and control inflation, and targeting nominal GDP."

If Macklem allows this option tomorrow, the loonie will collapse throughout the market. But this scenario is unlikely, given the rhetoric of the accompanying statement from the last meeting of the Bank of Canada. The loonie will receive support if Macklem focuses on the positive aspects of macroeconomic reports (which is more likely).

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As for the Canadian Nonfarm report, the situation is as follows. According to general forecasts, the Canadian labor market will show positive dynamics. First, the unemployment rate is expected to fall to 9.8% (the downward trend is observed here for the fourth consecutive month). Secondly, the number of employees should increase by 153,000. On the one hand, this is slightly less than the previous month (245,000), but on the other hand, the growth in September will be due to full employment (part-time employment will show a more modest result). At least, this is what the preliminary forecasts say.

Therefore, the loonie has every chance to get support from both macroeconomic reports and the leadership of the Canadian central bank. If these assumptions are realized, the USD/CAD pair will be able to test the main support level of 1.3160, which corresponds to the lower boundary of the Kumo cloud on the daily chart. You can enter sell positions either from current positions, or based on the results of Macklem's speech. It is advisable to place the stop loss at 1.3430 (the upper line of the Bollinger Bands on D1).

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*ECB's Lagarde: We Need To Maintain Ample Monetary Policy Stimulus

Trading 07 oct 2020 Commentaire »

ECB's Lagarde: We Need To Maintain Ample Monetary Policy Stimulus


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*U.S. Crude Oil Inventories Inch Up By 0.5 Million Barrels In Week Ended 10/2

Trading 07 oct 2020 Commentaire »

U.S. Crude Oil Inventories Inch Up By 0.5 Million Barrels In Week Ended 10/2


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Loonie Little Changed After Canada Ivey PMI

Trading 07 oct 2020 Commentaire »

Following the release of Canada Ivey PMI for September at 10:00 am ET Wednesday, the loonie changed little against its major counterparts.

The loonie was trading at 1.3285 against the greenback, 79.78 against the yen, 0.9489 against the aussie and 1.5627 against the euro around 10:05 am ET.


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Loonie Mixed Ahead Of Canada Ivey PMI

Trading 07 oct 2020 Commentaire »

At 10:00 am ET Wednesday, Canada Ivey PMI for September is due out. Ahead of the data, the loonie traded mixed against its major counterparts. While it held steady against the aussie, it rose against the rest of major rivals.

The loonie was worth 1.3275 against the greenback, 79.81 against the yen, 0.9488 against the aussie and 1.5624 against the euro around 9:55 am ET.


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*Poland CB Holds Key Interest Rate Unchanged At 0.10% As Expected

Trading 07 oct 2020 Commentaire »

Poland CB Holds Key Interest Rate Unchanged At 0.10% As Expected


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Italy Retail Sales Rise In August

Trading 07 oct 2020 Commentaire »

Italy's retail sales rose in August after falling in the previous month, data from the statistical office ISTAT showed on Wednesday.

The retail sales value rose a seasonally adjusted 8.2 percent month-on-month in August, after 6.0 percent fall in July. In June, retail sales grew 12.5 percent.

Sales of non-foods gained 13.8 percent monthly in August and food sales rose 1.6 percent.

On an annual basis, retail sales rose 0.8 percent in August, after a 7.1 percent decrease in the previous month.

Online sales grew 36.8 percent yearly in August.

On a month-on-month basis, the retail sales volume increased 11.2 percent in August, after a 8.5 percent fall in the preceding month.

In volume terms, retail sales remained unchanged year-on-year in August, after a 10.1 percent decrease in the prior month.


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France Current Account Deficit Narrows; Trade Deficit Widens

Trading 07 oct 2020 Commentaire »

France's current account deficit narrowed in August from the previous month, the Bank of France reported Wednesday.

According to data from the customs office, the trade deficit widened as exports decreased marginally amid an increase in imports in August.

The current account deficit totaled EUR 4.7 billion in August versus a EUR 5.7 billion shortfall in July.

The shortfall on goods trade rose to EUR 6.1 billion from EUR 6 billion. At the same time, the surplus on services trade was EUR 1.1 billion.

The surplus on primary and secondary income remained unchanged at EUR 0.3 billion in August.

The trade gap increased to EUR 7.7 billion in August from EUR 7.04 billion in July. In the same period last year, the deficit was EUR 5.3 billion.

Exports dropped 0.6 percent on month, while imports grew 1.1 percent in August.

On a yearly basis, exports declined 18.6 percent and imports decreased 11.7 percent.


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Taiwan Trade Surplus Rises In September

Trading 07 oct 2020 Commentaire »

Taiwan's trade surplus increased in September as exports rose and imports declined, figures from the Ministry of Finance showed on Wednesday.

The trade surplus increased to US$7.136 billion in September from US$3.151 billion in last year. Economists had expected a surplus of $5.20 billion. In July, the trade surplus was $6.466 billion.

Exports rose 9.4 percent year-on-year in September, following an 8.3 percent growth in August. Economists had expected an increase 6.6 percent.

Imports declined 5.4 percent annually in September, after a 8.6 increase in the preceding month. Economists had forecast a rise of 3.0 percent.

Exports of parts of electronic products, information, communication and audio-video products, plastic and rubber, and articles thereof grew in September, while those of base metals and related products, and machinery declined.

Imports of parts of electronic product gained in September, while those of machinery, chemicals, information, communication and audio-video products decreased.

Exports to Mainland China and Hong Kong and U.S.A. increased, while shipments to ASEAN, Japan and Europe declined in September.

In the January to September period, exports rose 2.4 percent, while imports fell 0.7 percent from a year ago.


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Dollar outgrows yen after Trump’s decision, pound struggles amid Brexit talks

Trading 07 oct 2020 Commentaire »

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Market sentiment is now largely dependent on Donald Trump and events in the United States. Investors continue to closely monitor the situation around the US elections. As Trump lags behind his rival Biden and the gap gradually widens, the Democratic representative could win over the incumbent in November. The possibility of this development supports the markets, weakening the position of defensive assets, including the US dollar.

Meanwhile, the postponement of the negotiations of the new stimulus package for the US economy supported the dollar, which managed to rebound against the yen. At the beginning of trading Wednesday, the USD / JPY pair showed growth and was quoted at 105.89. With regard to further increases in value, it may be limited. Jerome Powell's soft rhetoric and Trump's plans to introduce a $ 1,200 direct unemployment benefits bill to Congress could contribute to this dynamic.

Note that Powell stressed that the economy on its own without financial support cannot cope with the crisis. In addition, the increase in incidence will further exacerbate the already precarious situation in the US.

As for the stimulus package, which Democrats need no less than Trump, there may be surprises. It is not surprising if it turns out that Trump spoke about the suspension of the negotiation process exclusively "just like that". It is quite possible that in a few days it will become known that the parties will return to the negotiating table. In this case, it would be good to use the correction in the USD/JPY currency pair to open buy positions in the expectation of continuing the upward trend.

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The American factor, of course, makes its own adjustments to the dynamics of the GBP/USD pair, but here it is worth paying attention to the internal problems of the UK, namely Brexit. Now the markets are actively discussing rumors that Britain and the EU are approaching a trade deal, which is distributed by politicians on both sides.

At the EU summit in Brussels, which will be held on October 16, the results of trade negotiations will be evaluated. If the leaders of European countries see progress, then we can expect another delay. It looks like that's what it's all about.

The pound will also be supported by negative statistics on the US. Currently, the US trade deficit is at its peak in 12 years. To improve the situation, the dollar needs to be devalued. This will increase the export of American products. Therefore, officials of the US Central Bank are planning to keep low rates for a long time.

Goldman Sachs analysts also adhere to a bullish outlook for the GBP / USD pair. According to their calculations, the sterling should strengthen to 1.33 in the next six months. They support their position with the opinion that the "complex" Brexit deal will be concluded in early November and ratified by the end of December, that is, ahead of schedule. Right now, a significant degree of uncertainty about this deal is not warranted.

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