USD/CAD remains below the 1.30 handle an hour after the Bank of Canada Governor Poloz and Senior Deputy Governor Wilkins were responding to questions from the media following the release of the June Financial System Review. Currently, USD/CAD is trading at 1.2982, off the 1.2996 highs and from a low of 1.2935.
On the June Financial System Review, The Bank of Canada’s website carried the following summary:
“This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.”
The Financial System Review in 2 minutes 2018
- BoC’s Poloz: Will incorporate tariff impact in July’s monetary policy report
Meanwhile, while trade remains an uncertainty, up in the air, and while NAFTA seems to be a no-go for 2018 at least, the focus remains on the correlation between oil prices and commodities, as well as a shifting focus towards central bank policy ahead of the Fed, ECB and BoJ. Firstly, WTI has rallied (to $60bbls) yet commodity-FX is negative in the NY session, so far. The laggard overnight was the Aussie, falling on the back of the trade balance miss. Notably, the commodity currencies are lower despite a subdued dollar and US yields sinking on the day, (DXY trades between a range of 93.2130-93.5940, at 93.36 at the time of writing, while US 10 year yields are at 2.95% and at the lows of the day’s range between 2.95-2.99, -0.74%). Looking around, copper is also down at 3.2814 in a slight correction from the day’s low, so far, of 3.2569 and from a high of 3.3165. A lower adjustment in the dollar while the market consolidates should be supportive of the Loonie below the 1.30 handle, so long as oil remains elevated. However, the Canadian dollar remains vulnerable on the divergence between the BoC and Fed.
USD/CAD levels
Analysts at Scotiabank explained that USD/CAD short-term technicals are neutral-bullish where trend and momentum indicators are modestly bullish as USD/CAD consolidates below a pair of key technical levels. “Specifically, we continue to highlight the importance of the descending trend line drawn from the 2017-2017 highs just below 1.3050. It was briefly broken on Tuesday. We also highlight the importance of the upper bound of the ascending trend channel drawn from the September low, currently around 1.3200. Near-term support is expected below 1.2880 with near-term resistance above 1.3020.”
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