img CDN
img AUS
img NZ
img US
Call us now: 1.844.363.7297
imgOnline Dealing Login

Loonie Rallies on US July 4th Holiday

Published July 4, 2016
  • The Canadian dollar is trading at its best levels in six days against the greenback as it retraces post 'Brexit' losses
  • USDCAD was trading in the mid 1.2600's on the night of the historic referendum June 23rd and in the subsequent flight to safety traded to a high just above 1.3100 last week before recovering close to its 21 day moving average at 1.2860 this morning
  • Equity, commodity and general risk sentiment went into a tailspin as the UK voted to leave the EU, however once the dust settled prices across risk assets almost immediately began recovering their losses which helped the Loonie regain its footing
  • At first glance everything seems to be OK – crisis averted for now anyways – however it is interesting to note that despite the rebound in equity and commodity prices the bond market continues to spin a different story
  • Yields on 10 and 30 year US treasury bonds remain at extreme lows and highlight the uncertainty of the situation
  • The US 10 year bond is yielding a scant 1.46% this morning, near multi-decade lows and well below the 2.25% yield at the start of 2016
  • While this does reflect the shallower path of interest rate hikes communicated by the Fed recently, the uncertainty surrounding the impact of the UK exiting the EU is likely forcing money to the sidelines and into the safety of US treasuries, a situation which can be a harbinger of bigger storms on the horizon for financial markets
  • Turning to economic data, all eyes will be on US and Canadian dual employment reports that come out this Friday
  • The US is expecting payrolls to increase by 180k while Canada is looking for 10k positions to be added
  • Friday's reports certainly have the ability to create a lot of volatility and potentially could be the catalyst to break USDCAD out of its recent well defined range, so preparation will be key for those with near term currency exposures 

Chart: USDCAD testing the key 21 DMA at 1.2864