USDCAD falls from 1.2442 down to 1.2310 - two week low on higher oil

VBCE Daily Foreign Exchange Update for Tuesday, June 9, 2015

USDCAD spot rate: 1.2325 - 1.2330 (AS AT 8:09AM PST)

RANGES:	Asia:	1.2380	to	1.2419
	Europe:	1.2378	to	1.2442
	North America:	1.2317	to	1.2382

Technical Support / Resistance:

S2	S1	R1	R2
1.2260	1.2317	1.2440	1.2563

Key Economic Data Releases:

- U.S. wholesale inventories: 0.4% (exp. 0.2%)

Key Event Calendar:

DATE	CANADA	U.S.A.
June 10		Business inventories, crude oil stocks change
June 11	New housing price index	Jobless claims, retail sales
June 12		Producer price index, consumer sentiment index

Yesterday, USDCAD climbed from 1.2430 to 1.2472 before falling to 1.2396 on better than expected Canadian housing data. The pairing then bounced to 1.2450 before falling to 1.2383. The move below 1.2400 was short-lived with USDCAD climbing back to 1.2415 late in the session. Overnight, USDCAD dipped to 1.2380 before climbing to 1.2442. The move higher was short-lived and USDCAD dropped to 1.2330 this morning in the absence of any key data. A minor bounce to 1.2355 has since been followed by a move to 1.2310 – a two week low. Oil is on the rise for the 2ND straight day after comments made by the Saudi Arabia Oil Ministry: “production rise is the result of increased global demand – not designed to compensate for low oil prices.” On Thursday, U.S. retail sales data is expected to rise by 1.1% after no gain the previous month. Currently, the TSX and the DJIA are up 0.16% and 0.12% respectively. EURCAD is down 1% trading between 1.3848 and 1.4055. GBPCAD is down 1%, trading between 1.8849 and 1.9055. JPYCAD is down 0.55% trading between 0.00991 and 0.00999. Gold is up 0.23% trading between $1,172 and $1,183USD/oz., silver is down 0.12% trading between $15.97 and $16.19USD/oz., while oil is up 3.5% trading between $58.25 and $60.20.

 

Trouble in Oceania

The Swiss franc nudged the USD out of first place last week despite the news that Switzerland's economy shrank in Q1 by 0.2%, which may foreshadow a brief pause in the USD’s rally after strong advance since mid-May. A combination of month-end flows and a six point drop in Friday’s release of the May Chicago PMI, to contraction territory at 46.2, encouraged USD bulls to take profits ahead of this week’s busy economic calendar. The releases include a central bank meeting in Australia, the UK, and Europe as well as OPEC's semi-annual meeting. The key economic events are the monthly global PMI readings, Eurozone flash CPI, and the U.S. nonfarm payroll report.

The worst performing currencies last week came from the two main countries in Oceania, Australia and New Zealand as their currencies fell 2.7% and 2.38% respectively. Both economies are dealing with the reduced demand from China for their main export product, iron ore for Australia and milk for New Zealand. Both currencies are being pulled down against the USD by the divergence in monetary policy. 

The AUD was weighed down by Wednesday’s release of private capital expenditure which came in at -4.4% versus -2.3% that was expected. The data reveals that Australia’s transition away from a mining-dominated economy remains challenging and is still some time away. The capex data is the weakest in five years and supports the Reserve Bank of Australia's decision to cut the official cash rate in February and possibly at this week’s upcoming meeting.

The NZD fell to a five year low against the USD on Friday and has shed about 6.5% since mid-May as investors wagered that interest rates in New Zealand and in the U.S. were set on a diverging course. The catalyst for the move was the release of the ANZ Business Outlook Survey which fell to 15.7 in May from April's reading of 30.2. The survey showed that inflation expectations were at an all-time low of 1.6% in May, which is below the Reserve Bank of New Zealand's (RBNZ) 2% target midpoint. The string of poor data and dairy price indications has increased pressure on the RBNZ to cut rates. The central bank’s next meeting is on June 10th.

USDCAD falls from 1.2535 to 1.2430 as EURUSD surges 3 cents on Greece optimism

VBCE Daily Foreign Exchange Update for Tuesday, June 2, 2015

USDCAD spot rate: 1.2435 - 1.2440 (AS AT 8:45AM PST)

RANGES:	Asia:	1.2503	to	1.2535
	Europe:	1.2492	to	1.2531
	North America:	1.2430	to	1.2521

Technical Support / Resistance:

S2	S1	R1	R2
1.2305	1.2410	1.2560	1.2665

Key Economic Data Releases:

- U.S. factory orders: -0.4% (exp. 0.0%)

Key Event Calendar:

DATE	CANADA	U.S.A.
June 3	Int’l merchandise trade	ADP employment change, trade balance
June 4	Ivey PMI	Jobless claims
June 5	Net employment change	Non-farm payrolls, unemployment rate
	Unemployment rate

Yesterday, USDCAD climbed from 1.2439 up to 1.2563 with pull-backs limited to 1.2515. After the 3RD consecutive day of trading above the 1.25 level, USDCAD managed to close the session above 1.2500 near 1.2535. Canadian manufacturing data was better than expected and oil traded over $60 but general USD strength prevailed after the U.S. ISM manufacturing data was better than expected. Overnight, USDCAD remained confined to a 1.2492 – 1.2535 range. The USD began to broadly weaken on market optimism that Greece would avoid default on its loans. Eurozone inflation was also higher than expected sending the EURO 3 cents higher vs. the USD. The ensuing USD weakness has taken USDCAD down to 1.2430. A brief bounce to 1.2473 has been followed by a return to 1.2430. On Friday, Canada is expected to add 10,000 new jobs after nearly 20,000 job losses the prior month. The unemployment rate should hold steady at 6.8%. The U.S. is expected to add 225,000 jobs after additions of 223,000 prior. The unemployment rate is expected to remain unchanged at 5.4%. Currently, the TSX is up 0.34% while the DJIA is down 0.15%. EURCAD is up 1.30% trading between 1.3663 and 1.3916. GBPCAD is up 0.20%, trading between 1.8989 and 1.9122. JPYCAD is down 0.20% trading between 0.01001 and 0.01004. Gold is up 0.25% trading between $1,186 and $1,196USD/oz., silver is up 0.40% trading between $16.65 and $16.86USD/oz., while oil is up 1.10% trading between $60.11 and $61.20.

 

Meet your CSR: Q&A with Penny G.

You might recognize Penny from VBCE. Perhaps you've had the pleasure of having her serve you right before you took off for one of your eagerly anticipated vacations. Or maybe she provided you advice on how to help you save more money for your business. What you may not know are all the tiny details of why Penny is so special to all of her co-workers here at VBCE. 

In this month's post of 'Meet Your CSR' we asked Penny a few questions to help you get to know her better!

  

Tell us a little bit about yourself
My family and I immigrated to Canada in 2005 from Shanghai, China. My first job was working at the city broadcast station in my hometown when I was ten.

What thoughts come to mind when you tell people you work at VBCE?

It is a great company to work at! I literally work with my friends and mentors every day. We care for each other and we care for our customers too. 
 

What is your dream destination for a vacation?

At the moment, it would be Iceland.


What extra-curricular activities do you participate in?
I used to tutor mandarin during my spare time.   

Favorite song you would listen to on your dream vacation

"Amazing" by Sara Gazarek
 

If you could take one person on a dream vacation with you, who would it be?

It would be my mum.

Tell us about a stand out customer that you have previously serviced

I helped a couple from Singapore who were new to Vancouver and Canada. They were really anxious when they came to exchange for the first time because they are not sure how everything worked. After I explained to them about our rates and services, they were happy to know that we could meet their foreign exchange needs when they are away from home. I am glad we are able to help new immigrants like them to settle down into their new life faster and make them feel welcomed. 

Give us a Forex tip every savvy customer should know

If you have left over foreign currencies from your previous trips and you are not planning to go back to those countries, make sure to convert them back to Canadian or US dollars in a timely fashion. We won't be able to take old notes from our customers once the bills become outmoded.

Something  people do not know about me? 

I was never a workout person until recently I joined a part-time fitness and Yoga program at one of the centers near me. I am enjoying the sweaty workouts and challenges.

 

What is your favorite piece of bullion that you have ever come across

A customer recently sold us a 1oz. silver coin that is from the Republic of Marshall Islands and has a really cute Japanese Hachiko design on it.  
 

 

 

 

Is Deflation Scare Over?

　

The unexpected Tory victory in the UK general election catapulted the GBP to the top of the currency heap last week. The AUD was the second best performer helped by a shift in interest rate expectations to later in the year. The NZD was the only currency that shielded the USD by sliding into last place ahead of it. The latest employment and wage date; and the continued slump in dairy auction prices weighed heavily on the currency. Meanwhile, the closely watched U.S. employment and wage data did not offer a strong sign of a pick-up in the U.S. economy; helping extended the USD’s correction for a third week. The end result is that market watchers have pushed expectations of the Fed’s rate lift off from June to September.

The stunning victory by Prime Minister Cameron was shocking but it would have to take a back seat to the flash crash in the German bund market. Having fallen to just 0.05 % in mid-April, the benchmark 10-year German Bund yields shot as high as 0.78% intraday on Thursday, before easing again. This set off similar moves in the global bond market. Moves of this magnitude are extremely rare in government bond markets – rising yields can be a healthy development if the global economy is picking up speed, but it spells trouble ahead if they suddenly jump at a time of sluggish growth. Thus, the Deutsch Bund Kernschmelze (German bund meltdown) either signals that the threat of deflation has eased or that inflation is about to rise on top of a sluggish economy, which is characterised as stagflation.

Is the deflation scare over and are we now headed toward inflation? This may be the case, especially if we see what has transpired in the oil and copper market as of late. Since falling 60% between June and January to a six-year low of $45 a barrel, crude oil has posted a strong recovery gaining more than 30%. Copper is up close to 20% off its January lows which according to an old investor’s mantra means that the global economy is coming back to life – copper has a Ph.D. in economics because of its ability to predict turning points in the global economy. Because of copper's widespread use in most sectors of the economy, demand for copper is often viewed as a reliable leading indicator of economic health. If we are moving away from deflation and into inflation then we should expect central banks to rein in stimulus and start to raise interest rates.

The only problem is that the current macro-economic back-drop doesn’t support this scenario. Media reports of market participants within the fixed income arena are blaming the meltdown on the lack of liquidity. This topic is more complex than we care to explain here but in a nutshell the lack of liquidity at times reflects changes in structure of the fixed income market due to the involvement of central bank buying for their QE programs. This may explain the violence of the move but perhaps the change in sentiment may actually reflect a realization of a bonafide Eurozone recovery. Having said this, the bond meltdown may also be reflecting the tenuous situation in the Greek default negotiations. The pressure is mounting and even though Greece was able to scrape together enough funds to make Monday’s 767 Million euro payment to the IMF it does not have enough funds to get through to the end of the month.

 

Meet your CSR: Q&A with Kathy T.

You might recognize Kathy from VBCE. Perhaps you've had the pleasure of having her serve you right before you took off for one of your eagerly anticipated vacations. Or maybe she provided you advice on how to help you save more money for your business. What you may not know are all the tiny details of why Kathy is so special to all of her co-workers here at VBCE. 

In this month's post of 'Meet Your CSR' we asked Kathy a few questions to help you get to know her better!

 

Tell us a little bit about yourself
I have over 30 years of Banking and Foreign Exchange experience. I am a people person. I consider myself a “Customer Service Specialist.”

What thoughts come to mind when you tell people you work at VBCE?

I am proud to represent a company that shares my enthusiasm for providing exceptional service and great value for my customer’s money. 

What is your dream destination for a vacation?

I am going on vacation to Scotland this summer!  More of Europe is a must! But I do dream of going on a Vancouver Canucks hockey road trip! 
 

What extra-curricular activities do you participate in?

I am a loyal fan and season ticket holder of the Vancouver Canucks!  I love shopping, searching for fun jewelry pieces.
 

Favorite song you would listen to on your dream vacation
I love the song “This Girl Is On Fire” by Alicia Keyes

If you could take one person on a dream vacation with you, who would it be?

I am very lucky to be travelling with my Sister, Daughter and Niece to Scotland.

Tell us about a stand out customer that you have previously serviced

I was helping a lady that was converting US cash to Canadian and she was taking it back to her Bank. She does this monthly. I offered her our Online service and uncovered that she also sends electronic transfers to both her daughters in the US and the UK. She came in to do a simple transaction and I was able to offer her a service that will save her valuable time and money. She was very happy!

Give us a Forex tip every savvy customer should know

We do sell a great deal of exotic currencies. I encourage my customers to take a small amount  to start out with and to bring US dollars with them as they can get a better exchange  rate there. Also, to spend all of the currency there as we buy it back at a lower rate.

Something  people do not know about me?
I am a very creative person. I like to paint and would like to design my own jewelry one day!

 

What is your favorite piece of bullion that you have ever come across

I am a big fan of the Silver Maple leaf coins. I am collecting all of the different themed sets. There is a beautiful Kilo RCM coin in our inventory. Tempting!!



Position Adjustment - Euro was the top performer last week, US keeps interest rates at its current level and this Friday's April US non-farm jobs report will be in focus

What a week! The euro was the top performer on the week with a gain of over 3% and at one point moved a whole four euros against the USD. Technically, the euro rally may have run its course giving up almost a full euro on Friday and after having met the 61.8% Fibonacci retracement and coming within a whisker of its 100-day moving average. The price action in the euro last week caused clients, with euro exposure to their business, to call us with questions about what was happening. The simplest explanation is positioning. The euro has been the most heavily shorted currency in the futures market for some time now, so when everyone in the boat is leaning one way and a big wave hits the boat the result is that the wave redistributes the weight (position adjustment). Thus, the big move in the euro was due to a short squeeze as speculators bought the euro in order to exit their short trade and not due to a fundamental change in the prospects in the Eurozone.

 

The catalyst for the move was a combination of a poor reading for Q1 GDP and the FOMC announcement. The US Federal Reserve, as expected, kept interest rates at its current level, but offered little hints on the timing of its first rate hike in nearly a decade. What the Fed did do was to remove all calendar references on a potential window for raising its benchmark Fed Funds Rate making very clear that rate decision will be a data driven. Furthermore, the Fed said it will take into account labor market conditions, inflationary pressures, and expectations of international financial developments when it decides on the timing of a rate increase.

 

 

The latest reading of Q1 US GDP came in at 0.2% which essentially demonstrates that the economy stagnated in Q1, or to sugar coat it, the economy grew very, very, very slowly. This was a huge deceleration from the Q4 2014 when real GDP gained 2.2%. Economists on average were anticipating growth of 1% in Q1. How bad was it? Well, if it wasn’t for the biggest inventory build in history, which grew by $121.9 billion and merely remained flat, US Q1 GDP would not be 0.2%, but would be -2.6%.

 

Just like a year ago, many economists and investors are pointing to snowy winter weather as the root of the weakness. Other factors holding back growth this time around may have included the strong USD, pressure on the energy sector from lower oil prices, and dock worker strikes on the West Coast that disrupted that flow of trade. All of these excuses are what the Fed calls "transitory factors". Therefore, as long as inflation keeps moving to the Fed’s target and that the economy sees further improvement in the labor market then the Fed will be looking for an opportunity to raise interest rates. Having said this, this Friday’s April non-farm jobs report will be in focus. A strong report will keep a June rate hike as a possibility. A weak report would not only rule out a June rate hike, but would put into question a move in September as well.

 

 

The technical condition of the US dollar index is on much firmer ground after last week’s price action. The index has found support near the 50% Fibonacci retracement, the 100-day moving average, and the shelf of support which was carved out from mid-January to the end of February.

 

Furthermore, the RSI has turned up, the MACD looks to be making a bottom, and the full stochastics have crossed and turned up. The technical foot print makes us wonder if the chart is forecasting a good jobs number and thus a turn in the economic data, which dovetails nicely with the Fed’s transitory factors and the beginning of warmer weather.

 

 

 

Slip Sliding Away - "soft economic data" you Need to know about Tomorrow's US FOMC Statement

　

Just how fragile is the US dollar right now? It can’t even muster up a gain against the political backdrop of its cross Atlantic rivals, the UK and Europe. The GBP was the best performer last week despite all indications that the UK general election on May 7th will end with no clear cut winner resulting in a coalition-forming government with potential referendums on Scottish independence or an exit from the EU. Meanwhile, the euro was the second best performer despite not being able to come to an agreement with Greece and its mountain of unpayable debt.

The U.S. economic outlook continues to be plagued by soft data, which is making USD bulls nervous as their bullish stance appears to be slip-sliding away. The USD bullish case is predicated on the fact that the Fed will raise interest rates between June and September while the rest of the global central banks stand pat, but the continued tide of soft economic data questions this thesis. Last week it was the combination of new home sales, initial jobless claims, Markit PMI, and the durable goods report. All were less than stellar, which weighed on the USD. Of course, this string of bad news is good news to the equity markets which rallied to a record high as U.S. Treasury yields slipped.

Ever since the Fed dropped "patience" from their FOMC statement the media has proclaimed that the Fed has become data dependent. You have good reason to chuckle because when hasn’t the Fed been data dependent? With this in mind, market participants now pay more than cursory attention to second and third tier data, which barely drew attention in the past, in hopes of gleaming insight into the timing of the Fed’s first interest rate hike in more than 6 years. Having said this, the market appears to be less confident in the US economy and in the ability of the Fed to deliver said rate hike which is weighing on the USD.

 

Tomorrow's FOMC statement could spell more problems for the USD as the Fed meets. Without a news conference or updated projections, the FOMC statement will be the focus. If the statement acknowledges the broadly weaker data for consumption, manufacturing, and the labor market in recent months then the USD will sell off quickly. However, if the Fed sticks with their transitory argument for the recent string of weak data then USD bulls will breathe a collective sigh of relief. We suspect that the greater challenge for USD bulls will be the April employment report on May 8, especially after the disappointing March report.

 

 

USDCAD falls to 1.2021 ahead of tomorrow's U.S. Fed Announcement

VBCE Daily Foreign Exchange Update for Tuesday, Apr. 28th, 2015

USDCAD spot rate: 1.2036 - 1.2041 (AS AT 8:36AM PST)

RANGES:	Asia:	1.2085	to	1.2110
	Europe:	1.2057	to	1.2116
	North America:	1.2021	to	1.2093

Technical Support / Resistance:

S2	S1	R1	R2
1.1984	1.2020	1.2100	1.2200

Key Economic Data Releases:

-U.S. Case Shiller home price indices: 5.0% (exp. 4.7%)

-U.S. consumer confidence: 95.2 (exp. 102.5)

-U.S. Richmond Fed manufacturing: -3 (exp. -2)

Key Event Calendar:

DATE	CANADA	U.S.A.
Apr. 29	Raw mat / industrial prod. prices	GDP, pending home sale, Fed interest rate
Apr. 30	GDP	Personal income/spending, jobless claims
May 1	RBC Manufacturing PMI	Markit/Ism Mfg., consumer sentiment index

Yesterday, the downtrend continued with USDCAD falling from 1.2200 down to 1.2081. The pairing bounced marginally to hold in a 1.2090 – 1.2110 range for the balance of the session. USDCAD had been confined to a 1.21 – 1.23 range last week after the large move lower (from 1.2650 down to 1.2088) the week before. USDCAD dipped to 1.2052 in early North American trading before bouncing to 1.2093. Again, U.S. economic data was weaker than expected today, a common trend recently, and USDCAD has fallen to 1.2021 amidst broad-based USD weakness. A brief bounce to 1.2038 has been followed by a re- test of 1.2020. The main event risk comes tomorrow with the U.S. Fed interest rate policy announcement. After a string of weaker than expected data, the Fed could push back raising interest rates to September now – the main reason why the USD has been under pressures vs. most currencies these past few weeks. Currently, the TSX is down 0.33% while the DJIA is up 0.14%. EURCAD is up 0.35% trading between 1.3145 and 1.3225. GBPCAD is up 0.25%, trading between 1.8377 and 1.8489. JPYCAD is down 0.16% trading between 0.01012 and 0.01017. Gold is up 0.81% trading between $1,199 and $1,214USD/oz., silver is up 1.07% trading between $16.32 and $16.66USD/oz., while oil is up 0.37% trading between $56.11 and $57.79.

Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada, U.S. Federal Reserve, CNBC, Forexlive