Lest anyone think that the Bank of Canada may be easing given comments from BOC’s Wilkins earlier this week, BOC Governor Poloz made it very clear earlier today that he feels the Bank has monetary conditions “about right”. He also said he feels that global conditions have eased a lot. These comments were looked at as hawkish by the markets. Wilken’s comments on Tuesday were taken by the market as dovish, given that she mentioned the BOC has room to maneuver and has other “tools” the Bank can use, such as forward guidance. Wilkins is considered a front runner to take the Head position when Poloz’s term ends in mid-2020.
As Poloz was speaking, USD/CAD came under pressure and traded down 45 pips from 1.3325 down to 1.3270.
Source: Tradingview, City Index
USD/CAD wasn’t the only pair to sell off on the Poloz comments. EUR/CAD fell 70 pips from 1.4470 down to 1.4700. In addition, GBP/CAD sold off over 100 pips from 1.7270 to 1.7162.
However, as I have been writing about ad nauseam, USD/CAD has been confined to the apex of the symmetrical triangle dating back to early 2016 between 1.3150 and 1.3400.
Source: Tradingview, City Index
What will be the catalyst to push price out of the triangle? Two immediate items come to mind. The first is Canadian Retail Sales, which are to be released tomorrow. Headline expectations (MoM) are for sales to have risen 0.2% in September after falling -0.1% in August. However more importantly, retail sales ex-autos (MoM) are expected to have risen 0.3% in September after falling -0.2% in August. If these figures are much better or much worse than expected, this may be enough to drive price out of the range.
The second item, and the more likely event to move USD/CAD, is the ratification of the United State – Mexico- Canada- Agreement (USMCA). Speaker of the US House of Representatives Nancy Pelosi has indicated that she is hopeful the Democrats and the Republicans can get issues resolved as early as TODAY! The sticking point is that Democrats want stronger enforcement mechanisms in the pact. The passage of the USMCA would be good news for both the Canadian Dollar and the Mexican Peso, and both may go bid.
If the USMCA gets passed sometime soon and the Bank of Canada is hawkish moving forward, then these may help act as a catalyst to push USD/CAD out of the apex of the long-term symmetrical triangle!
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.