The Canadian dollar has been stuck between 1.2800-1.2900 levels for the past week and will likely stay that way the rest of the day. Tomorrow’s US employment data may have an impact, but there are no large expectations so chances are it will remain unchanged.
USDCAD 1.2866, 1.235, 1.2825 1.2885, 1.2895, 1.2898
USD-CAD has remained buoyant, posting a one-month high of 1.2914 earlier in the week before retreating to the mid-to-lower 1.2800s. The move extended a rebound from mid-April two-month low at 1.2527. A correction in oil prices, which have descended back under $68.0 in the WTI benchmark market after making a 40-month high at $69.56, along with a generally firmer bias in the U.S. dollar and associated rise in U.S. Treasury yields, have driven the rebound in USD-CAD. The Canadian dollar had already been coming off the boil in the wake of the April BoC policy meeting, as the statement indicated that the central bank would maintain its cautious stance on future policy changes, which remain data dependent. The latest price action in USD-CAD has negated the downside trend that had been in play over the prior three weeks, from levels near 1.3100.
EUR-USD has settled around 1.2000 after yesterday posting a new four-month low at 1.1937. The move reflected dollar weakness caused by a less hawkish than expected Fed statement following its widely anticipated decision to leave policy on hold. We don’t think the statement will materially affect expectations for the Fed to high in June and beyond, and expect the dollar to remain a buy-on-dips trade. EUR-USD has remained comfortably below its 200-day moving average at 1.2054. This is the third consecutive week the pair has declined in what has become the sharpest run lower since November 2016. The breach and close below the 200-day moving average this week is the first time below this average since April 2017. Expectations for strong U.S. jobs data on Friday have been maintaining a bid for dollars, while timely survey data show that a cooling in economic growth is afoot, and ECB President Draghi gave dovish-tilting remarks following the central bank’s April policy review last week. Regarding the U.S. payrolls report, we expect a solid 210k headline rise, though risks are to the upside following tight initial claims data and remarkable strength in consumer confidence and vehicle sales data. We advise EUR-USD trend following. Resistance is at 1.2054-60.