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Markets, Loonie Calm Despite Attempted Turkish Coup; USDCAD Seasonal Study

Published July 18, 2016
  • Late Friday, a military coup was launched in Turkey to overthrow President Erdogan, however forces loyal to the President were able to quell the uprising by Saturday
  • Fallout across financial markets was limited to the Turkish Lira which gave up approximately 5% against the USD
  • Equities in Asia and Europe listed sideways to open the week with all major asset classes essentially flat from Monday
  • USDCAD opens in the mid 1.2900's this morning and continues to trade in a very tight sideways consolidation pattern
  • The greenback put in a low against the Loonie in May at 1.2458 and since then has posted a series of 'higher-lows' throughout June and July
  • Topside has been limited to three failed attempts near 1.3150 making for a very tight ascending triangle pattern formation
  • This type of trading can indicate a greater possibility of a topside breakout (USD strength) rather than a move lower (USD weakness)
  • In support of this theme we have noticed that, during July 1 – Dec 31st over the last three years, USDCAD has gained an average of 6.8% (Chart 2 below)
  • As well, oil prices are at a precipice just above $44 a barrel – despite the summer driving season there has been a steady climb in inventories for refined products such as gasoline, diesel and heating oil which means that refiners will be purchasing less crude as autumn nears which has the potential of creating another period of downward price pressure for oil
  • Given Canada's stagnant labour markets, underwhelming export data and on going pressure across commodity markets, the seasonal trend in USDCAD is an interesting theme that should be given some consideration for companies taking a closer look at their FX exposures over the next five months

Chart: USDCAD sideways consolidation continues.

Chart: Greenback gained an average of 6.8% during July – Dec over last three years.  Average in White.  2015 (Purple), 2014 (Green), 2013 (Blue).  Rebased to zero.