Intraday Market Thoughts

Loonie Takes its Lumps as Oil Crumbles

by Adam Button
Jan 12, 2015 23:50

Another 5% fall in oil prices sparked risk aversion as the ECB wavers on sovereign QE. The Canadian dollar was the worst performer and hit a 5-year low while the yen led the way. Chinese trade data is a key event in the hours ahead. 1 of our 2 CADJPY Premium shorts hit its final 99.30 target for a 190-pip gain, while the other short is 10 pips away from the final 98.70 target for a 100-pip gain. Both AUDJPY shorts are in progress. China's trade figures are up next at 2 am GMT. A New set of Premium Trades will be released shortly, before the Chinese figures.

The fall in oil prices continues its relentless slump with Brent touching $47.16 and WTI down to $45.62. It's been a common pattern that fear in the oil market spills over to oil stocks and the broader market and that continued Monday. The US dollar gave up solid European gains and finished the day generally unchanged.

The exception was against the Canadian dollar as USD/CAD shot to 1.1970, the highest since 2009 in a more than 1 cent rally. The BOC's Business Outlook survey also indicated slower investment as the oil patch dries up.

Many central bankers spoke throughout the day but the focus is on the ECB. Handelsblatt reports that a majority of ECB policymakers support sovereign QE but at least 7 are against it. One of them continues to be Nowotny who said government bond purchases were only one option. Makuch and Noyer also spoke about QE and neither were committal and the crowded euro-short trade could see some profit taking ahead of Jan 22.

The Australian dollar was also soft on Monday, sliding to 0.8150 but the key level is 0.8000. That could come under pressure as soon as Asia-Pacific trading with Chinese trade data on the agenda at 0200 GMT.

The key metrics are imports and exports, which are expected up 6.0% and down 6.2% y/y, respectively. The market has grown increasingly sensitive to this data set. The numbers could be skewed by commodity prices rather than volumes so guard against a whipsaw.

Act Exp Prev GMT
Imports (DEC) (y/y)
-7.4% -6.7% Jan 13 2:00
Exports (DEC) (y/y)
6.8% 4.7% Jan 13 2:00

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