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March rate hike on the horizon?

Posted on: February 16, 2017

After strong Retail Sales and CPI prints yesterday, you may be surprised to learn we walked in this morning almost 100 points lower in USDCAD from the highs of yesterday. We also saw another large build in crude inventories which the market largely shrugged off. US Yields capitulated after going on a tear on Tuesday, causing the USD to be sold against most crosses after popping up 40 points on the print. The probability of a March rate hike has increased to 40% now as economic numbers south of the border continue to point north.

Overnight the theme of USD weakness persisted. This morning we saw some more secondary data out of the US coming in above expectations. Housing Starts and Building Permits saw small beats with upward revisions, while Jobless Claims came in lower than expected. Philly Fed knocked it out of the park, coming in with the highest print since 1985, but none of these really move the needle on USD.

For those watching USDCAD, we continue to see USD buying in the 1.3020/30 range as participants reload ahead of a strong support band. Without any catalyst for a break higher or lower the technicals continue to dominate the trade. Top side resistance is strengthening around 1.3150 so if you have USD to sell in the near term it may be prudent to sell some in front of that. If you have USD to buy, continue to enjoy tests lower while adding some protection through stop-losses or USDCAD collars.

  • Yesterday’s NA Range 1.3067 – 1.3120
  • Asia Overnight Range 1.3053 – 1.3082
  • London Overnight Range 1.3010 – 1.3056

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