Oil is now over $70 USD a barrel, Trump’s Iran-deal deadline is this week, markets are getting nervous. If Trump stays within the deal, then oil will likely drop back to the $65 USD a barrel, however, if he does pull the plug, then we could see $75 -$80 USD almost immediately.
The USDCAD is unchanged even with the oil pop, Nafta talks resume in Washington Monday. U.S. Commerce Secretary Wilbur Ross said talks could drag on for months, is so, then the USDCAD will remain weak. Expect a continuation of the 1.2800-1.2900 range.
USDCAD 1.2846, 1.2841,1.2836 1.2871, 1.2880, 1.2885
USD-CAD has remained buoyant, posting a one-month high of 1.2918 last week before retreating to the mid 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 tipped back under 1.1950 after posting an intraday high at 1.1978 in Tokyo trade. swinging Friday’s four-month low at 1.1910 back into scope. We remain bearish of EUR-USD, despite Friday’s underwhelming U.S. jobs report, and still expect the Fed to hike rates at its June FOMC meeting. The April jobs report was not as soft as the modest rise in payrolls might suggest, even as the report wasn’t as strong as the 3.9% unemployment rate implies. Strength in hours worked which should support an acceleration in Q2 GDP to a 3.6% clip, and with upside risks. Wages remain tepid, however, and that dichotomy should leave the FOMC on its gradual normalization course next month. On the Eurozone side of the coin, recent data has been clouded by the impact of bad weather in March, but April PMI surveys point to a sustained moderation in the pace of economic expansion, which has taken the edge out expectations for the ECB to commence a de-stimulation of monetary policy later in the year. We advise EUR-USD trend following. Resistance is at 1.2011-12.