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ECB leaves rates unchanged

Posted on: March 09, 2017

After starting the week slow, USDCAD embarked on a steady grind higher yesterday, touching 1.3500 before relaxing a bit into the New York close. The theme for some participants was buy the USD against any cross they will give you. CAD and other commodity currencies were under additional pressure as oil broke out of its recent range to the downside. “Buy the rumor, sell the fact” is a popular term, but can you still call it a rumor when the March rate hike is 100% priced in? We will see next week if the adage holds true.

This morning we have the first half of consecutive risk events, as the ECB left rates unchanged and Draghi is about to hit the tapes as I type this. We will see if he makes any comments on the recent upticks in CPI. Tomorrow is the second half, with Non-Farm Payrolls in the US and Canada. ADP numbers in the US showed a huge beat yesterday, printing 298k compared to expectations of 187k, which helped spur USD buying on predictions of favorable employment numbers. Predicting what the Canadian Employment report will say is kind of like trying to forecast the weather with a spoon, but estimates are calling for a net reduction of five thousand jobs.

For those watching USDCAD, we have broken through 1.3500 this morning. Key levels to watch now sit up above around 1.3590/1.36, which is the double top from late 2016. If you have USD to sell it might be prudent to unload a portion ahead of this level as it has proven tough to crack. If 1.3300 and 1.3400 are still acceptable, a collar with protection at those levels will give you further upside in case momentum carries USDCAD through 1.3600 with conviction.

  • Yesterday’s NA Range 1.3440 – 1.3500
  • Asia Overnight Range 1.3483 – 1.3505
  • London Overnight Range 1.3484 – 1.3534

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