Published July 21, 2016
- Overnight news headlines were rather bearish for equities and risk sentiment as Bank of Japan Governor Kuroda said there is no need for "helicopter money" from the central bank to stimulate the economy
- That was followed up by the European Central Bank's first interest rate decision since Brexit and ECB President Draghi left rates unchanged – largely in line with expectations but still a double dose of dissapointment for the equity crowd looking for more robust Central Bank sitmuluative measures
- Global stocks lurched lower after hitting broad nine month highs yesterday and US and Canadian indices are expected to open lower as well
- It is a relatively busy day of economic data for North American kicked off by US jobless claims for last week which continued to trend lower coming in at 253K compared with 265K expected and 254K previously – a positive sign for the US economy
- However, a reading of business activity from the Philadelphia Federal Reserve fell far below expectations at -2.9 compared with a 5.0 forecast
- Canada reported an increase in Wholesale Trade activity for May of 1.8% over April, handily beating the 0.2% forecast with most of the gains coming from increased auto and auto parts sales
- USDCAD continues its incredibly tight trading range seen over the past few days, with spot holding above the 1.3000 handle but remaining just below key price resistance for the US dollar at 1.3120
- Oil prices got a mild boost as inventories in the US fell for the ninth consecutive week, although the figures were broadly in line with expectations
- Bearish price projections continue to gain favour, however the glut of gasoline and refined products continues to grow and exceed demand despite peak driving season
- As well, upcoming seasonal maintenance during autumn creates a natural drop in crude demand from refineries and thus oil could come under increased pressure as WTI holds on to the knife's edge just above key levels of technical price support at $44.60
Chart 1. USDCAD sideways consolidation continues, bias to the upside.
Chart 2. Are WTI prices on the brink of a larger pull back?