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US Dollar Quietly Benefiting From Strong Data

Published July 20, 2016
  • Overnight market action has been muted once again as equities in Asia and Europe listed sideways and US and Canadian markets are expected to open with slight gains
  • Oil prices continue to trade sideways just above key levels of technical price support – WTI is changing hands at $44.57 which is acting as a line of demarcation and if broken could propel a deeper pullback 
  • The Canadian dollar is once again trading with an ever so slight downward bias but remains well contained within recent trading ranges
  • The US dollar is quietly enjoying a recent bout of significant strength against a basket of six major currencies – yesterday the USD index broke out of a significant downtrend and the catalyst seems to have been another strong piece of economic data
  • Housing Starts in the US for June rose by 4.8% from May, handily beating expectations and continuing a string of strong data from retail sales to job creation that point to a fundamentally strong economy – especially relative to economic trends north of the 49th…
  • …Interestingly, and as depicted in the second chart below, USDCAD is lagging the broader move higher for the greenback
  • This is another piece in the puzzle that may point to an underlying bias for USDCAD upside in the near to medium term – of course nothing is certain, so plan accordingly
  • On Friday Canada releases Retail Sales and Inflation data which could be the catalyst to break USDCAD out its recent tight trading range

Chart: 1. USDCAD sideways consolidation continues, bias to the upside. 

Chart 2. USD Index has left USDCAD in its wake – will the two converge in the near term?