INR Drops On Risk Appetite…One Month Highs! MTFX:0002747

Dear  Arif,

The Indian rupee fell the most in seven weeks on concern capital inflows into emerging markets will slow as the U.S. Federal Reserve cut its asset purchases. The rupee also dropped as importers boosted dollar purchases to pay month-end bills. The rupee dropped the most since June 13 against the U.S. dollar.

At the time of writing the SPOT rate for USD/INR is around 60.

Regards,

Arif Harji 

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Canadian GDP And US Jobless Claims, Another Bumpy Ride For The FX Market

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Slightly Bullish. Spot at 1.0914
EUR/CAD: Slightly Bullish. Spot at 1.4602
GBP/CAD: Neutral. Spot at 1.8414
EUR/USD: Bearish. Spot at 1.3381
GBP/USD: Bearish. Spot at 1.6872
Today’s Commentary
USD/CAD Commentary

The dollar was trading at six-month highs against a basket of other major currencies on Wednesday ahead of a preliminary report on U.S. second quarter growth and the outcome of the Federal Reserve’s latest policy meeting later in the day. Earlier this month Fed Chair Janet Yellen said that rates could rise sooner if the recovery in the labor market continued.

The dollar advanced to 10-month highs against a basket of major currencies on Wednesday after preliminary data showed that the U.S. economy rebounded strongly in the second quarter. The U.S. dollar rose to one-and-a-half month highs against its Canadian counterpart on Wednesday, supported by the release of stronger than expected data on U.S. second quarter growth as markets eyed the Federal Reserve’s upcoming policy statement.

Today, the U.S. is to release the weekly report on initial jobless claims, as well as data on manufacturing activity in the Chicago area. In Canada there is only one major report on the GDP numbers which are expected to strengthen. Tomorrow the FX markets see the US Unemployment, consumption expenditure, ISM Manufacturing and consumer sentiments.

Short term technicals are strongly bullish. The pair’s support is at 1.0782 and the resistance is at 1.0964.

Today’s expected trading range is 1.0880 – 1.0980

EUR/USD Commentary

The euro remained under heavy selling pressure amid concerns over the divergence in monetary policy between the European Central Bank and its major peers. Data earlier showed that Spain’s economy grew at a faster than expected rate in the second quarter, but a separate report showed that consumer prices fell unexpectedly this month, underling concerns over the threat of deflationary pressures in the euro area. Another report showed that the annual rate of inflation in Germany slowed to 0.8% this month from 1% in June.

The euro fell to fresh eight-month lows against the U.S. dollar on Wednesday, falling below the 1.34 level, after data showed that the U.S. economy rebounded strongly in the second quarter. Today, euro zone is to release preliminary data on consumer inflation and unemployment, while Germany is to publish data on retail sales and unemployment. Tomorrow the focus will be on the Markit Manufacturing PMI in the Euro region, fairly a lighter day for closing the week in Europe.

Short term technicals remain bearish. A break after the psychological 1.3400 level the support is at 1.3257 and the resistance is at 1.3511.

Today’s expected trading range is 1.3350 -1.3420.

GBP/USD Commentary

The pound was steady at one-and-a-half month lows against the broadly stronger dollar on Wednesday, amid growing confidence in the U.S. recovery as investors awaited a preliminary report on U.S. second quarter growth and the outcome of the Federal Reserve’s latest policy meeting later in the day.

Yesterday, has seen the British Pound to US Dollar decline by over 0.2 per cent during the North American session as US growth figures trumped expectations. Today is fairly a lighter day for the pound sterling so all eyes from the UK will be focusing on the actions in the Euro region and in the North American region.

While, tomorrow the week shuts off quietly for the pound against all its major counterparts with only one report on Markit Manufacturing with unchanged expectation from previous.

Short term technicals are bearish with the pair looking for a support at 1.6786 followed by a resistance at 1.7011.

Today’s expected trading range is 1.6840 -1.6925.

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Opening FX Rates (USD)
USD/CAD 1.0914
EUR/USD 1.3381
GBP/USD 1.6872
USD/JPY 102.89
AUD/USD 0.9291
USD/HKD 7.7498
USD/PLN 3.1104
USD/THB 32.10
Opening FX Rates (CAD)
USD/CAD 1.0914
EUR/CAD 1.4602
GBP/CAD 1.8414
CAD/JPY 94.12
AUD/CAD 1.0140
CAD/HKD 7.099
CAD/PLN 2.8496
CAD/THB 29.41
Opening Commodities (USD)
Oil 99.52
Gold 1294.01
Silver 20.63
Economic and Event Calendar
USD – ADP Non Farm Employment Change Jul 30
USD – Gross Domestic Product Jul 30
USD – FOMC Statement & Interest Rate Decision Jul 30
EUR – Consumer Price Inflation Jul 31
CAD – Gross Domestic Product Jul 31
Disclaimer:

MTFX accepts no responsibility for the accuracy or completeness of any information here in contained nor for any forecasts or recommendations. MTFX shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by MTFX that you will profit from the strategies herein or that your losses in connection therewith can or will be limited.

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All Eyes On U.S. GDP Print & Fed Announcement

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Slightly Bullish. Spot at 1.0863
EUR/CAD: Slightly Bullish. Spot at 1.4554
GBP/CAD: Neutral. Spot at 1.8390
EUR/USD: Bearish. Spot at 1.3403
GBP/USD: Bearish. Spot at 1.6930
Today’s Commentary
USD/CAD Commentary

The Canadian dollar weakened to touch its lowest level in more than five weeks against the greenback on Tuesday, caught by a wave of favor for the U.S. dollar that was spurred by optimism over U.S. economic data due later in the week. The pair closed the trading day above the 1.0850 level for the first time in over a month.

While Canada has a busy economic calendar this week, with May economic growth and June producer prices on tap, the market’s main focus will be on the slew of U.S. data. It includes July’s unemployment report out on Friday and the first look at second-quarter economic growth and the Fed’s interest rate decision out today.

The greenback’s push sent the loonie further to a low of 1.0864 before dropping to close at 1.0857. “All major currencies were driven lower very quickly against the U.S. dollar," said Greg Moore, senior currency strategist at Royal Bank of Canada in Toronto. "It looks more dramatic given we’ve been in such a tight range the past day and a half." "Part of it does reflect the fact that consensus seems to be getting a little bit more optimistic on the outcome of various U.S. events this week."

After trading largely sideways for two weeks, the loonie dropped sharply on Friday, pushing through some key technical levels to break out of the range it had been in. Last Friday’s move seems to have shifted the bias higher for the pair to the detriment of the loonie.

Overall, the Canadian dollar seems to have risks to the downside with a rising bullish sentiment on the U.S. dollar. Today’s U.S. GDP release and Fed announcement will provide direction for the currency in the near term.

Short term technicals are bullish. The U.S. dollar-Canadian dollar pairing faces near-term resistance at C$1.0870 followed by the psychological 1.0900 level.

Today’s expected trading range is 1.0830 -1.0930

EUR/USD Commentary

The euro dipped to 8-month lows against the dollar on Tuesday after a cheery U.S. consumer confidence report sent investors betting the Federal Reserve will deliver an upbeat assessment of the economy after its policy meeting ends today.

The euro came under pressure ahead of the release of the euro zone’s latest inflation report on Thursday. A soft consumer price index could prompt the European Central Bank to loosen policy while the Fed and other central banks prepare for tightening. The divergence in policy between the Fed and ECB is expected to widen over the next few months putting further pressure on the euro as we move toward the end of the year.

Short term technicals continue to remain bearish. A break of the psychological 1.3400 level will then likely have the pair targeting the November 2013 low of 1.3296.

Today’s expected trading range is 1.3360 – 1.3420

GBP/USD Commentary

The GBP/USD was down in yesterday’s session and close the trading day at 1.6943. Data on Friday showed UK gross domestic product expanded by 0.8 per cent in the April-June period, the same strong pace as in the first three months of the year. That followed Thursday’s forecast from the International Monetary Fund that Britain will easily be the fastest-growing advanced economy in 2014.

The International Monetary report published on the U.K’s economy was relatively upbeat, but stated that the sterling is overvalued and warns that the Bank of England Monetary Policy Committee may have to tighten policy quickly.

The IMF says that while the current ultra-accommodative policy is appropriate for now “Policy might, however, have to be tightened quickly if costs run ahead of productivity growth or slack is absorbed.” Productivity growth has been exceptionally weak in the UK, but policymakers believe that rising business investment should help to correct this.

Analysts and market participants are divided over whether the first hike in Bank Rate is most likely to come in November this year or February next year, both Quarterly Inflation Report months.

While the sterling may give back a little in the short term, the currency should remain well supported over the medium term given that the BoE is still widely expected to be the first to raise interest rates.

Short term technicals are bearish with the pair targeting the 1.6900 level followed by 1.6850.

Today’s expected trading range is 1.6910 – 1.6970

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Opening FX Rates (USD)
USD/CAD 1.0863
EUR/USD 1.3403
GBP/USD 1.6930
USD/JPY 102.26
AUD/USD 0.9364
USD/HKD 7.7498
USD/PLN 3.0974
USD/THB 31.91
Opening FX Rates (CAD)
USD/CAD 1.0863
EUR/CAD 1.4554
GBP/CAD 1.8390
CAD/JPY 94.11
AUD/CAD 1.0169
CAD/HKD 7.1339
CAD/PLN 2.8526
CAD/THB 29.36
Opening Commodities (USD)
Oil 101.31
Gold 1299.49
Silver 20.59
Economic and Event Calendar
USD – ADP Non Farm Employment Change Jul 30
USD – Gross Domestic Product Jul 30
USD – FOMC Statement & Interest Rate Decision Jul 30
EUR – Consumer Price Inflation Jul 31
CAD – Gross Domestic Product Jul 31
Disclaimer:

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Rangebound Trade Continues Ahead of Key Economic Data

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Neutral. Spot trading at 1.0808
EUR/CAD: Neutral. Spot trading at 1.4520
GBP/CAD: Slightly Bearish. Spot trading at 1.8331
EUR/USD: Neutral. Spot trading at 1.3434
GBP/USD: Slightly Bearish. Spot trading at 1.6960
Today’s Commentary
USD/CAD Commentary

The Canadian dollar firmed modestly against the greenback on Monday, steadying after Friday’s sharp drop, as investors position themselves ahead of some key economic reports on both sides of the border later this week. The Canadian dollar closed yesterday’s trading session at 1.0800.

The currency did not recover very much of last week’s losses, which could lead to more downside after it fell through some significant technical levels on Friday, analysts said. Markets seems to be on a bit of a holding pattern ahead of the critical economic releases this week with the currency pair trading in a very narrow range during yesterday’s session.

From a technical perspective the Canadian dollar-U.S. dollar pairing faces key technical resistance at the C$1.0830 area and a break there could take it toward C$1.0950. Weekly positioning suggests that since the U.S. dollar-Canadian dollar has held onto its gains and hasn’t retreated traders are willing to hold on to their U.S. dollar long positions for a near term run up on the U.S dollar.

After last week’s relatively quiet domestic calendar, investors will get a look at more economic data in the coming days, including Canadian economic growth for May and producer prices for June.

The bigger focal point this week will be the United States, where markets will get the first reading of second-quarter growth figures and the July unemployment report, as well as a Federal Reserve meeting.

The U.S. gross domestic product report could have the biggest impact on markets, with risk to the downside if the economy doesn’t achieve the 3 percent growth rate economists forecast.

Canadian government bond prices were mixed, with the two-year yield off 1 Canadian cent to yield 1.088 percent. The benchmark 10-year added 2 cents to yield 2.117 percent, a more than one-year low.

Short term technicals remain bullish with the pair trying to break the 1.0830 resistance level. Support is located at 1.0737 (Friday’s low).

Today’s expected trading range is 1.0775 – 1.0850

EUR/USD Commentary

The euro edged higher against the dollar on Monday but gains remained limited amid concerns over the divergence in monetary policy between the European Central Bank and its major peers. The pair closed the trading day at 1.3440.

The euro traded on a negative note and declined around 0.7 percent in the last week as mixed global market sentiments exerted downside pressure in the currency. Additionally, fall in German business climate data acted as a negative factor. However, favorable manufacturing and services data from the region cushioned sharp fall in the currency.

Overall the policy divergence between the ECB and the Fed will continue to play out on the currency markets over the next several months and analysts continue to bet that the euro will continue to drift lower with year-end targets in the low 1.30’s.

Short term technicals are bearish with key downside levels of 1.3400 and 1.3296 (November 2013 low).

Today’s expected trading range is 1.3400 – 1.3460

GBP/USD Commentary

The pound edged up against the U.S. dollar in light trade on Monday, after disappointing U.S. home sales data but remained within close distance of a one-month low. The pair closed the trading day at 1.6985.

On a weekly basis, the Sterling Pound traded on a negative note and decline around 0.7 percent on the back of mixed market sentiments. However, favorable economic data from the U.K. restricted a sharp downside movement in the currency. UK’s Prelim Gross Domestic Product (GDP) remained unchanged at 0.8 percent in the Q2 of 2014. Index of Services was at 1 percent in May from 0.9 percent a month ago.

This week is a relatively light week in the U.K from a fundamental economic reports perspective with the highlight being Friday’s manufacturing PMI numbers. In the absence of any domestic developments the pair should trade the remainder of the week on boarder market sentiments.

Short term technicals are bearish with the pair looking to test support at 1.6850.

Today’s expected trading range is 1.6925 – 1.6990

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Opening FX Rates (USD)
USD/CAD 1.0808
EUR/USD 1.3434
GBP/USD 1.6960
USD/JPY 101.96
AUD/USD 0.9395
USD/HKD 7.7498
USD/PLN 3.0896
USD/THB 31.813
Opening FX Rates (CAD)
USD/CAD 1.0808
EUR/CAD 1.4520
GBP/CAD 1.8331
CAD/JPY 94.31
AUD/CAD 1.0153
CAD/HKD 7.1696
CAD/PLN 2.8581
CAD/THB 29.43
Opening Commodities (USD)
Oil 101.40
Gold 1308.03
Silver 20.79
Economic and Event Calendar
USD – Consumer Confidence Jul 29
USD – ADP Non Farm Employment Change Jul 30
EUR – German Consumer Price Inflation Jul 30
USD – Gross Domestic Product Jul 30
USD – FOMC Statement & Interest Rate Decision Jul 30
Disclaimer:

MTFX accepts no responsibility for the accuracy or completeness of any information here in contained nor for any forecasts or recommendations. MTFX shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by MTFX that you will profit from the strategies herein or that your losses in connection therewith can or will be limited.

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Canadian Retail Sales Rise. USD/CAD Remains Rangebound

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Neutral. Spot at 1.0720
EUR/CAD: Neutral. Spot at 1.4442
GBP/CAD: Bearish. Spot at 1.8240
EUR/USD: Neutral. Spot a 1.3474
GBP/USD: Slightly Bearish. Spot at 1.7019
Today’s Commentary
USD/CAD Commentary

The U.S. dollar fell to session lows against the Canadian dollar on Wednesday after data showed that Canadian retail sales rose at a faster than expected rate in May. The pair closed the trading day at 1.0725.

Statistics Canada reported that retail sales rose 0.7% in May, ahead of forecasts for a 0.6% gain, while the previous month’s number was revised up to 1.3%. Core retail sales, which strip out automobile sales, rose 0.1% in May, falling short of expectations for a 0.3% increase and slowing from an upwardly revised 0.8% in April.

The Canadian’s dollar’s gains were held in check as demand for the greenback continued to be underpinned by expectations that U.S. interest rates may rise sooner than expected. There had been speculation that a higher than expected inflation reading would have pulled forward expectations for such rate hikes. Data on Tuesday showing that U.S. inflation rose 0.3% in June, in line with forecasts, added to the view that the economy is improving.

Scotiabank’s Camilla Sutton observed in a commentary Tuesday that Fed funds futures are pricing in a conservative July 2015 interest rate hike, while “our Scotiabank house view is for Q215.”

“There has been a bit of back and forth with expectations for the first interest rate hike with it being pulled forward and then pushed back,” said Sutton, chief FX strategist and managing director, Scotiabank Global Banking and Markets.

There is significant indecision on the USD/CAD pair as SPOT has failed to make new highs resulting in technical signals that are beginning to fade.

Short term technicals are mixed with initial support located at 1.0700 while resistance is located at 1.0794.

Today’s expected trading range is 1.0700 – 1.0775

EUR/USD Commentary

The EUR/USD continued it’s down trend yesterday and closed the day at 1.3463. Traders continue to worry about the economic health of the eurozone. The euro touched multi-month lows against the dollar yesterday as investors fretted about the impact on the eurozone economy and possible fresh sanctions against Russia following the downing of Flight MH17.

The euro’s weakness may be more linked to a possible divergence in monetary policy between the European Central Bank and the Fed. The ECB has launched unprecedented easing measures, as the Fed scales back its stimulus program, which is U.S. dollar supportive.

Despite the weaker-than-expected core inflation reading, market expectations suggest that the US Federal Reserve is on track to continue tapering its bond purchase program and then raise interest rates in the latter half of 2015.

Short term technicals continue to remain dovish with the pair looking for a near term test of 1.3380.

Today’s expected trading range is 1.3425 – 1.3495

GBP/USD Commentary

The GBP/USD weakened yesterday to close at 1.7036 after BBA mortgages missed expectations. Sterling pared gains against the dollar and the euro on Wednesday after minutes from this month’s Bank of England policy meeting were not as hawkish as some in the market had anticipated.

The minutes showed that BoE officials discussed whether there was a case for an early interest rate rise, but there were concerns about hurting the recovery. The nine members of the Monetary Policy Committee voted unanimously to keep interest rates on hold, as forecast by economists in a Reuter’s poll.

Fears of snapping off the British economy’s deepening economic roots will prevent the Bank of England from raising interest rates from their record low of 0.5 per cent until early next year, a Reuters poll found.

Unemployment has already fallen below the central bank’s target, the economy is bigger than it was before the financial crisis and inflation has risen close to its targeted level.

Britain’s unemployment rate fell to its lowest level since late 2008 in the three months to May but regular pay growth was much weaker than expected, the slowest since comparable records began more than a decade ago. The Monetary Policy Committee has made clear that wage inflation is one of the key indicators it is watching and that it would need to see a substantial rise before proceeding with any increase in interest rates.

The recent weakness in the GBP highlights that too much good news was already priced into the currency and that any data misses would result in deterioration of the sky high levels. Nonetheless, the BoE is still largely expected to be the first of the G4 to raise interest rates and as a result should allow for a bid on the GBP into the year end.

Short term technicals have turned bearish with support located at 1.6952 while resistance is located at 1.7095.

Today’s expected trading range is 1.6975 – 1.7050

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Opening FX Rates (USD)
USD/CAD 1.0720
EUR/USD 1.3474
GBP/USD 1.7019
USD/JPY 101.62
AUD/USD 0.9439
USD/HKD 7.7501
USD/PLN 3.0694
USD/THB 31.841
Opening FX Rates (CAD)
USD/CAD 1.0720
EUR/CAD 1.4442
GBP/CAD 1.8240
CAD/JPY 94.73
AUD/CAD 1.0121
CAD/HKD 7.2273
CAD/PLN 2.8612
CAD/THB 29.69
Opening Commodities (USD)
Oil 102.90
Gold 1299.42
Silver 20.79
Economic and Event Calendar
CNY – HSBC Manufacturing PMI Jul 23
EUR – German Manufacturing PMI Jul 24
GBP – Retail Sales Jul 24
USD – Initial Jobless Claims Jul 24
USD – New Home Sales Jul 24
Disclaimer:

MTFX accepts no responsibility for the accuracy or completeness of any information here in contained nor for any forecasts or recommendations. MTFX shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by MTFX that you will profit from the strategies herein or that your losses in connection therewith can or will be limited.

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USD/CAD Listless On Rangebound Trade – Retail Sales Release Should Provide Direction

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Slightly Bearish. Spot at 1.0723
EUR/CAD: Slightly Bearish. Spot at 1.4442
GBP/CAD: Slightly Bearish. Spot at 1.8268
EUR/USD: Bearish. Spot at 1.3468
GBP/USD: Bearish. Spot at 1.7037
Today’s Commentary
USD/CAD Commentary

The U.S. dollar traded largely higher against most major currencies yesterday after investors digested solid U.S. inflation and existing home sales numbers and determined the U.S. economy continues to improve and is in need of less support from the Federal Reserve.

The U.S. consumer price index rose 2.1% in June, unchanged from the previous month and in line with forecasts, which drew applause for the dollar. On a month-over-month basis, U.S. consumer prices were up 0.3% after a 0.4% increase in May, also in line with expectations.

Figures that met but did not exceed the Street’s expectations. A strong upside surprise could have rattled nerves and sent many investors rethinking what the Federal Reserve would do with monetary policy, thus creating uncertainty.

The Market expects the Fed to end its bond-buying program around October and then raising interest rates some time in 2015, though the length of time that will pass between those two policy moves remains up in the air.

Overall the U.S. economy seems well underway to a strong recovery which should lend a supportive tone to the USD.

In Canada there were no data releases yesterday and the pair remained within its recent multi-day ranges. Today’s retail sales will certainly provide some much needed fundamental data and will provide some direction for the CAD in the short term. A catalyst is needed to move the currency pair out of its recent range.

Short term technicals continue to suggest an upside risk to the pair with resistance currently located just below the 1.0800 level. Support comes in at 1.0700.

Today’s expected trading range is 1.0700 – 1.0775

EUR/USD Commentary

The EUR/USD eased yesterday breaking through the 2014 low of 1.3477 to close at 1.3465 as the US dollar benefited from the safe haven mood of the markets and on hopes of a stronger recovery in the US. The Eurozone outlook has become increasingly worrisome with both geopolitical and fundamental economic concerns. Even with the European Central Bank’s extraordinary easy policy—including the recently unveiled unprecedented negative deposit rates, near-zero interest rates and a fresh round of low-cost loans to pump up lending—the banking system is fragile.

While the euro has fallen recently from its May highs of 1.39 to below 1.34, a drop of nearly 3 percent, the currency pair still trades above its historical average. Market participants, economists and policymakers still find themselves scratching their heads about the remarkable resilience of the currency in the face of so many factors building against it.

Overall most market participant continue to suggest that the EUR is overvalued and look for further downside on the currency pair to the low 1.30’s by the year end.

Short term technicals have turned bearish with the pair looking to test the psychological 1.3400 level.

Today’s expected trading range is 1.3440 -1.3490

GBP/USD Commentary

The pound edged lower against the dollar on Tuesday in a quiet trading session and closed the trading day at 1.0767. Over the last few session the pound seems to be giving up some of its recent gains and edging lower toward the psychological 1.70 level. Soft CBI trends yesterday did not affect he pound as the markets look forward to today’s release of the BoE minutes as well as Carney’s press conference.

The BoE minutes will provide some fresh insight into the Bank’s monetary policy stance and future forecasts. Market participants expect a volatile trading session as the BoE release will certainly provide short/medium term direction on the currency pair.

Short term technicals are mixed with initial support located at 1.7037 while initial resistance comes in at 1.7100.

Today’s expected trading range is 1.7000 – 1.7075

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Opening FX Rates (USD)
USD/CAD 1.0723
EUR/USD 1.3468
GBP/USD 1.7037
USD/JPY 101.40
AUD/USD 0.9446
USD/HKD 7.7505
USD/PLN 3.0672
USD/THB 31.782
Opening FX Rates (CAD)
USD/CAD 1.0723
EUR/CAD 1.4442
GBP/CAD 1.8268
CAD/JPY 94.53
AUD/CAD 1.0129
CAD/HKD 7.2265
CAD/PLN 2.8612
CAD/THB 29.63
Opening Commodities (USD)
Oil 102.52
Gold 1307.09
Silver 20.79
Economic and Event Calendar
GBP – BoE Minutes Jul 23
GBP – Carney Speech Jul 23
CAD – Retail Sales Jul 23
CNY – HSBC Manufacturing PMI Jul 23
USD – New Home Sales Jul 24
Disclaimer:

MTFX accepts no responsibility for the accuracy or completeness of any information here in contained nor for any forecasts or recommendations. MTFX shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by MTFX that you will profit from the strategies herein or that your losses in connection therewith can or will be limited.

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Geopolitical Turmoil Dominates FX Markets

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Slightly Bullish. Spot at 1.0750
EUR/CAD: Neutral. Spot at 1.4488
GBP/CAD: Neutral. Spot at 1.8344
EUR/USD: Bearish. Spot at 1.3484
GBP/USD: Neutral. Spot at 1.7075
Today’s Commentary
USD/CAD Commentary

The USD/CAD was relatively flat yesterday amid market concerns over mounting tensions in Ukraine and in the Middle East. The pair closed the trading day just shy of 1.0740 and trading very comfortably within last week’s trading range. For now the CAD is maintaining recent ranges against a host of currencies after last week’s Bank of Canada’s announcement.

The bank’s governor, Stephen Poloz, sounded neutral on the outlook, playing down a recent rise in inflation but playing up worry about risks facing the economy.

USDCAD has risen modestly from Wednesday; with a consolidation around 1.0750 as market participants consider the off-setting impact of an explicitly neutral Bank of Canada, an improved US outlook, a two-day rally in oil prices, and the dampening impact of geo-political developments. In terms of CAD drivers, near term correlations continue to highlight an overwhelming impact from oil prices, as relative monetary policy (2Y US-CA spread) remains disconnected.

Last Wednesday’s Bank of Canada events have weighed on policy expectations, lowering domestic interest rates while narrowing the US-CA 2Y spread to its lowest level since late 2011— a level that would typically be associated with much higher levels in USDCAD.

The USD/CAD outlook has changed somewhat over the last few weeks. The positive shift in data from Canada is encouraging and decreases the risk of a rally north of the YTD high of 1.1279; however, unless the BoC turns more dovish, market analysts continue to expect the CAD to weaken to the 1.10-1.11 level by the end of the year.

Short term technicals continue to remain bullish with the pair looking to break the 1.08 level. Support is currently located at 1.0700 while initial resistance is located at 1.0775.

Today’s expected trading range is 1.0700 -1.0780

EUR/USD Commentary

The EUR/USD breached the 1.3500 level momentarily before settling at 1.3520 to close the day. The intraday move may be a future trend suggesting the stimulus methods implemented by the European Central Bank and President Mario Draghi may be working. Shortly after the ECB announcement in June, the major Euro players established a so-called “line in the sand” at 1.3500 while they wait for data to confirm the effectiveness of the ECB’s actions.

Last week, ECB President Draghi said that the high priced Euro was “a risk to the sustainability of the recovery.” Weakness in the Euro suggests that investors are finally buying into this strategy, setting up the Euro for further downside action.

Some will argue, however, that the events in Ukraine and the possible link to Russia could mean additional sanctions on the nation which could hurt the Euro Zone economy. Developments from a geopolitical perspective have also added to the downside pressure of the EUR over the last few weeks.

Overall a catalyst is needed to push the EUR decisively lower. The flash CPI due on July 31may act as such a catalyst as further softening in inflationary pressure will force the ECB into further stimulus.

Short term technicals are beginning to shift slightly bearish with support located at 1.3425 while resistance is located at 1.3550.

Today’s expected trading range is 1.3425 – 1.3525

GBP/USD Commentary

The sterling was relatively quiet on Monday trading in a very narrow range. The pair closed the trading day at 1.0772, essentially at the same levels it closed the week last week. This week should provide some direction for the currency with the release of the BoE minutes on Wednesday and the GDP print on Friday. Market analysts are betting on a hawkish set of minutes while GDP is expected to come in with a strong number.

The GBP/USD seems set for a leg up with expectations that the BoE will turn more hawkish on better than expected domestic data and an improving fundamental backdrop. Markets are currently pricing in a 65% chance of two separate rate hikes within the next 12 months.

Short term technicals remain mixed for the moment with the support located at 1.0737 while resistance is located at 1.7192.

Today’s expected trading range is 1.7050 -1.7125

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Opening FX Rates (USD)
USD/CAD 1.0750
EUR/USD 1.3484
GBP/USD 1.7075
USD/JPY 101.54
AUD/USD 0.9386
USD/HKD 7.7511
USD/PLN 3.0728
USD/THB 31.789
Opening FX Rates (CAD)
USD/CAD 1.0750
EUR/CAD 1.4488
GBP/CAD 1.8344
CAD/JPY 94.42
AUD/CAD 1.0088
CAD/HKD 7.2109
CAD/PLN 2.8601
CAD/THB 29.57
Opening Commodities (USD)
Oil 103.00
Gold 1305.86
Silver 20.79
Economic and Event Calendar
USD – Core CPI Data Jul 22
USD – Existing Home Sales Jul 22
GBP – BoE Minutes Jul 23
GBP – Carney Speech Jul 23
CAD – Retail Sales Jul 23
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