Stronger Canadian Data, Stronger Canadian Dollar

By MoneyWay | Dec 1, 2017


Currently             Close                     Range

USDCAD               1.2700                   1.2897                   1.2698-1.2902

EURCAD               1.5252                   1.5252                   1.5104-1.5357

GBPCAD               1.7150                   1.7443                   1.7138-1.7467

EURUSD               1.1928                   1.1904                   1.1851-1.1940

Prior                      Actual

CA: Gross Domestic Prod Q3       Q/Q       1.1%                      0.4%

—————————————Y/Y         3.7%                      3.0%

Gross Domestic Prod Sep              M/M     -0.1%                     0.2%

—————————————Y/Y        3.5%                      3.3%

Employment                                     Nov       35K                         79.5K

Unemployment                                Nov        6.2%                      5.9%

US: ISM Manufacturing Index Nov           58.7                        58.2

PMI Manufacturing Index Nov                   54.6                        53.9

Construction Spending Oct                          0.3%                      1.4%


The Canadian economy continues to remain strong, outlasting most analysts’ predictions. November employment increased a much greater than anticipated 79,500 while the unemployment rate fell by 0.4 percentage points to 5.9 percent — the lowest rate since February 2008. Expectations were for a modest 10,000 increase in employment and a 6.2 percent unemployment rate. Although the numbers show a slight slowdown in the GDP data, it is less than expected. The Canadian dollar rallied a full penny on this news. Also, oil prices are up nearly a $1 USD a barrel, adding to the CAD’s strength.


30 day simple moving average 1.2765

60 day simple moving average 1.2584

Support                                                Resistance

USDCAD   1.2697, 1.2678, 1.2675               1.2712, 1.2727, 1.2738


XE Market Analysis:

USD-CAD has retreated toward 1.2850 after yesterday capping out a four straight day run higher at 1.2909, which was a one-month peak. The recent stalling out in the oil price rally helped give the pairing an underpinning in recent sessions. BoC policymaker guidance have also over the last month or so been emphasizing that there is no rush to continue with its gradual tightening cycle. USD-CAD has support at 1.2805-08, and resistance at 1.2920.

The euro, and EUR-JPY in particular, has remain buoyant. EUR-USD edged out a four-day high of 1.1933, while EUR-JPY rallied to a four-month high, at 134.29. The recent run of strong data out of the Eurozone, juxtaposed to uncertainties about the U.S. tax reform bill and Fed tightening projection in 2018, have been keeping EUR-USD underpinned. The confirmation hearing of Fed chairman designate Powell this week also showed him to be focused on job growth, similar to Yellen, suggesting that he won’t be an unbridled hawk. The technical picture of EUR-USD also remains a bullish one, despite the recent pull-back. Trend support comes in at 1.1825-26, which was tested earlier.

USD-JPY edged out an 11-day high of 112.69 in the early Asia-Pacific session, and has since remained buoyant. This makes it the fourth consecutive day the pair has risen. Yen weakness has been driving the move. EUR-JPY logged a four-month high, at 134.29, GBP-JPY a two-month high of 152.52, and AUD-JPY a 10-day peak. A flood of data releases were seen today out of Japan, the more salient of which from a monetary policymaker perspective, was that inflation remains benign, with the October CPI headline coming in a just 0.2% y/y and the core CPI version at 0.8% y/y, well off the 2.0% BoJ target. Other data included a solid outcome in the November manufacturing PMI, which rose to a 53.6 reading from 52.8 in the month prior, its best in 44 months. Capital expenditure rose a solid 4.3% q/q in Q3, while labour data showed that the job to applicant ratio rose to its highest since January 1974.

Sterling has motored upward this week, driven by Brexit-related optimism. Cable topped 1.3500 for the first time in two months, logging a peak at 1.3549. Markets are anticipating good news from PM May’s meeting with top EU officials on Monday, with media reports suggesting that agreement has been reached over the final financial settlement, and the Irish border issue. This would greenlight talks on the future trading relationship between the UK and the EU on the other side of Brexit. We have been recommending running with the trend for now while maintaining vigilance on Brexit-related news. Cable support is at 1.3500, and resistance at 1.3610-13.

EUR-CHF broke above the recent high at 1.1723 and clocked a new trend peak of 1.1731, which is the loftiest level seen since January 2015, the month when the SNB abandoned its 1.2000 floor. There have been multiple failures to sustain gains above 1.1700 over the last month, so market participants will be wary of supply at these levels. We remain bullish: Assuming the Eurozone has conquered, or can conquer, existential political threats, and assuming the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable, we continue to anticipate EUR-CHF will make an eventual return to 1.2000. Support is at 1.1683-85.

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