Intraday Market Thoughts

USD/CAD Hits 3-Year High

by Adam Button
Jan 8, 2014 0:44

The Canadian dollar tumbled Tuesday on soft economic data and a technical breakout. It was the worst performer while USD and GBP led the way. Up later, it's the Australian job vacancies report.  

A hat trick of negative news swamped CAD.

  1. The trade deficit at $0.9B in Nov was worse than the $0.1B expected and the prior number was revised $1B lower.
  2. The Ivey PMI fell to the lowest since 2009 at 46.3 vs 54.5 exp
  3. BOC Governor Poloz said his biggest worry is under-performing inflation
The Ivey data boosted USD/CAD above the cycle high of 1.0738, hitting stops and sparking a broad round of dollar buying that hit every currency. The moves against other currencies were eventually erased but USD/CAD strength remained as the pair climbed as high as 1.0781. There is talk that Poloz could introduce a dovish bias at the Jan 22 meeting but that's a longshot.

Elsewhere in the market, the US dollar outperformed on trade balance numbers as the deficit hit $34.3B compared to $40B expected. Numerous economists boosted Q4 growth estimates after the report, some by more than 0.5 percentage points. The initial market reaction was subdued but as the day continued, gains mounted.

Early in Asia-Pacific trading, the AiG performance of construction index tumbled to 50.8 from 55.2. The big drop isn't a major surprise after the survey jumped to 55 from 35 in the middle of 2013. At 0030 GMT, Australia releases the job vacancies report for November. It's rarely a market mover but with AUD/USD teetering on Tuesday, it could tip it over. The prior reading was +3.1% m/m.

Long USDCAD stands among our existing Premium Insights in addition to NZDUSD, EURUSD & GBPUSD. Ashraf issued 2 new trades in NZDUSD with 3 charts as the risk-reward ande technical dynamics is altered for the USD against the major pairs. All new and existing trades are in the Premium Insights.
Act Exp Prev GMT
Ivey PMI
46.3 55.0 53.7 Jan 07 15:00
Trade Balance
-34.25B -40.00B -39.33B Jan 07 13:30
Trade Balance
-0.94B -0.15B -0.91B Jan 07 13:30

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