The Canadian dollar continues to strengthen, housing starts were at their highest six-month level since 2008, the unexpected increase gives the Bank of Canada reason to hike rates at its next meeting, if not then, definitely the one after. Even as Toronto and Vancouver real estate prices slow down, the remainder of Canada is still growing.
Oil prices jumped on comments that Saudi Arabia wants oil prices to be $80 USD a barrel by 2019. The Saudi government wants to issue stock in its state owned energy company, Aramco, in order to get the price that it needs, oil needs to be $80 USD a barrel. Saudi’s oil minister has increasingly intimated that oil inventories will decrease, in order to achieve this outcome. However, oil prices in Europe versus the Americas are significantly different, Brent Crude reached over $70 USD, while West Texas reached $65.20.
USDCAD 1.2589, 1.2581, 1.2578 1.2625, 1.2648, 1.2658
USD-CAD has ebbed to a six-week low of 1.2674. A 3%-plus rebound in oil prices over the last day, and an associated fairly-strong revival in risk appetite in global markets have given the Canadian dollar, and other dollar bloc units, a boost. This helped offset disappointment from the news that an announcement on the NAFTA renegotiation will be delayed. The latest price action in USD-CAD affirms a downside trend that’s been developing over the last three weeks, from levels above 1.3100, and we expect more downside. Initial resistance is at 1.2699-1.2700.
EUR-USD met good demand into 1.2300, which propelled the pair on a rebound to a 1.2335 intraday high, which is a six-session peak. The price action fits talk of there being a sell-dollars-on-gains view among speculative accounts and a slippage-minimizing tactic by real money managers following the big U.S. jobs report miss of last week. The weak U.S. data undercut the influence of the apparent slowing in Eurozone growth momentum. EUR-USD remains near the midway levels of a broad consolidation range that’s been seen for some two months now, which has followed a 14-month rally phase from sub-1.0500 levels. More of the same seems likely, with the odds for a big-picture breakout seeming low at the present time.
USD-JPY settled around 107.00 after edging out a two-session high at 107.24 amid a bout of general yen weakness that was seen during the Tokyo session. Chinese President Xi’s keynote speech from the Boao Foreum today mollified investor anxieties by de-ratcheting the trade war rhetoric by pledging that Chinese economy will open up and will lower import tariffs on vehicles. Although details were limited, this managed to lift stock markets in Asia, along with U.S. and European stock index futures. The Nikkei 225 closed with 0.5% higher, while S&P 500 futures were showing gains of over 1% . The yen weakened against this backdrop as safe haven positions unwound. USD-JPY has support at 106.77-80.
The pound has remained buoyant amid a softer dollar and yen environment in forex markets. Cable clocked a fresh two-week high at 1.4179, and GBP-JPY a two-month high, at 151.72. Sterling has also managed to eke out a new three-week high against the euro, despite the common currency concurrent making highs versus the dollar and yen. An above-forecast BRC retail sales report out of the UK may have helped the pound somewhat, with sterling markets having been sensitive to consumer sector data of late as participants fine tune expectations for a BoE rate hike as soon as May. The new high in Cable extends the rally sparked by Friday’s U.S. jobs report miss, and puts in some more distance in from the three-week low posted last week at 1.3965. We have been prognosticating that Cable is in process of forming a trading range in the low-to-mid 1.4000s. Near-term support is at 1.4130, ahead of 1.4057-60.