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

Market Update

EncoreFX’s daily market updates are written by our experienced and professional dealing team.

USDCAD Tests 1.3300 Ahead of Dual Jobs Reports at 830am ET

Published October 7, 2016
  • USDCAD spiked higher in early Noram trading, with spot rising 0.5% from yesterday's close before running into selling pressure right at the 1.33 handle
  • A break of 1.33 is likely to trigger a lot of of US dollar buy orders, causing another spike higher as many hedge books are likely short USD above that level
  • The US dollar has seen a broad based rally overnight fueled by the continuing Brexit saga which has severely crippled the allure of the Pound Sterling…
  • …at one point GBP/USD dropped 6% during Asian trade to 1.1491 before recovering late in the session to trade with a 1.24 handle, a more modest 2% fall
  • Seems to have been a “flash crash” – loose terminology for a series of stop loss orders being triggered amid a dearth of liquidity… blame the computers, I suppose
  • The Loonie certainly felt some of the resulting risk-off pinch that followed and is so far ignoring WTI prices that are above $50 for a second day
  • Is the breakdown in correlation between WTI and CAD the canary in the coal mine for the Loonie? 
  • Sentiment surrounding the proposed OPEC production cut seems to be improving but the Canadian dollar has not benefited at all 
  • USDCAD maintains a strong positive correlation with US yields and short term US yields are at their highest since May
  • The Market continues to call the Fed's bluff with only 25bps of tightening priced in by end of 2017…
  • …conversely, the Fed forecasted 200bps in hikes by end of 2017 at their September meeting…
  • …if the market has to catch up to the consensus view at the Fed then USDCAD could really run higher in the medium term
  • So far, the market has been correct in calling out the bluff and today's employment reports will be key to see if this trend can continue
  • Consensus is for the US to add 175k jobs with unemployment steady at 4.9%
  • Canada is looking for a 10k gain with unemployment at 7.0%
  • US numbers will have to be at least +225k, along with unemployment at 4.8% and higher weekly earnings as well, for odds of a December hike to move much higher than the current 57% (Chart 2)
  • There are lots of subsequent data as well this morning (Chart 3) so we could see some more volatility in USDCAD before the day is out

Charts: (1) USDCAD tests key 200 DMA. (2) Fed rate hike odds. (3) Economic Calendar.