Canadian GDP & US Personal Consumption On Tap

Market Snapshot (near-term 48 hour outlook)
USD/CAD: Bearish. Spot at 1.0843
EUR/CAD: Bearish. Spot at 1.4296
GBP/CAD: Bearish. Spot at 1.7989
EUR/USD: Neutral. Spot at 1.3186
GBP/USD: Neutral. Spot at 1.6590
Today’s Commentary
USD/CAD Commentary

The dollar pared losses against its Canadian counterpart on Thursday, easing off a one-month trough as strong U.S. economic growth and jobless claims reports lent support to the greenback. The strong data confirmed Federal Reserve Chair Janet Yellen’s comments at Jackson Hole last week saying that the U.S. economy is recovering and the labor market is improving.

In Canada, official data on Thursday showed that the current account deficit narrowed to C$11.9 billion in the second quarter, from a revised deficit of C$12.0 billion in the three months to April. Analysts had expected the current account deficit to remain unchanged in the last quarter.

U.S. dollar held mostly steady against the other major currencies yesterday, as the release of upbeat U.S. economic growth and jobless claims data confirmed the view that the U.S. recovery is on track. The U.S. gross domestic product grew at a revised annualized rate of 4.2% in the second quarter of this year, according to the Commerce Department, up from a preliminary estimate of 4.0% and better than market forecasts for a downward revision to 3.9%.

The numbers firmed the dollar earlier by cementing expectations that the Federal Reserve will close its bond-buying program around October and hike benchmark interest rates some time in 2015.

Today, expect the greenback to move on U.S. personal spending and income reports, a Chicago-area factory gauge and consumer sentiment figures. From Canada, the bumpy ride is expected to be from the GDP reports that are expected to be higher than previous quarter. Next week opens with a holiday on Monday with reports starting on Tuesday with ISM Manufacturing.

Short term technicals signal bearish symtoms with resistance located at 1.0824 while support is located in the 1.0996.

Today’s expected trading range is 1.08 – 1.09

EUR/USD Commentary

The euro slipped against an advancing dollar on Thursday after data revealed the U.S. economy grew at a faster clip in the second quarter than markets were expecting, which firmed expectations that the Federal Reserve will begin hiking interest rates next year. The euro continued to see residual support after German Finance Minister Wolfgang Schauble said comments made by European Central Bank President Mario Draghi suggesting fiscal policy could spur growth were "over interpreted."

Draghi said last week that policy makers are ready to take more unconventional action if needed to stimulate a sluggish euro zone economy, which left many pondering the possibility that fiscal stimulus could accompany loose monetary policies to jumpstart European recovery.

Today, expect the pair to move on euro zone inflation and unemployment data as well as on U.S. personal spending and income reports, a Chicago-area factory gauge and consumer sentiment figures. Next week as the north American session is closed for labour day there are reports on Markit Manufacturing in the Euro region along with the GDP reports in Germany on Monday.

Short term technicals are mixed where the support is located at 1.3108 and resistance at 1.3287.

Today’s expected trading range is 1.3150 – 1.3225

GBP/USD Commentary

The pound held steady against the dollar yesterday as concerns the Russia-Ukraine conflict is flaring up anew offset upbeat U.S. economic indicators. In the U.K., the Confederation of British Industry earlier reported that realized sales rose to a six-month high of 37 this month, from a reading of 21 in July, compared to expectations for a rise to 27.

As tensions, yesterday afternoon, have made new advances in the situation between Russia and Ukraine, the US Dollar is appealing to more investors as a source of a safe haven.

Today, the pair is expected to move on U.S. personal spending and income reports, a Chicago-area factory gauge and consumer sentiment figures. Next week in the UK also (like Europe) opens with Markit Manufacturing reports along with Mortgage approvals being the most important ones for Monday.

Short term technicals show mixed signals with the support located at 1.6509 while resistance is located at 1.6686.

Today’s expected trading range is 1.6550 – 1.6625

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Opening FX Rates (USD)
USD/CAD 1.0843
EUR/USD 1.3186
GBP/USD 1.6590
USD/JPY 103.97
AUD/USD 0.9338
USD/HKD 7.7499
USD/PLN 3.1958
USD/THB 31.96
Opening FX Rates (CAD)
USD/CAD 1.0843
EUR/CAD 1.4296
GBP/CAD 1.7989
CAD/JPY 95.86
AUD/CAD 1.0124
CAD/HKD 7.146
CAD/PLN 2.9468
CAD/THB 29.47
Opening Commodities (USD)
Oil 94.82
Gold 1286.36
Silver 19.52
Economic and Event Calendar
EUR – Germany Retail Sales Aug 29
EUR – Consumer Price Index Aug 29
USD – Personal Consumption Expenditure Aug 29
CAD – Gross Domestic Product Aug 29
USD – Consumer Sentiment Index Aug 29
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Loonie Extends Rally – GDP Numbers on Tap

Market Snapshot (near-term 48 hour outlook)
USD/CAD: Bearish. Spot at 1.0860
EUR/CAD: Bearish. Spot at 1.4316
GBP/CAD: Bearish. Spot at 1.8013
EUR/USD: Neutral. Spot at 1.3185
GBP/USD: Neutral. Spot at 1.6586
Today’s Commentary
USD/CAD Commentary

The Canadian dollar strengthened against the greenback yesterday extending the previous session’s gains as it benefited from broad U.S. dollar weakness and as investors looked ahead to key data releases today and tomorrow.

The rally in the U.S. currency over the past two months has been one of the major forces behind the loonie’ s recent weakness that sent it close to the key resistance level of C$1.10 earlier in the week. The softness in the greenback on Wednesday drove the Canadian dollar to a one-week high, with the currency reaching a low of 1.0830 before recovering slightly to close in the 1.085’s.

"As much as we want to look at Canadian specific factors, I think the bigger story is just a broader U.S. dollar move lower, where you’re getting some of the geopolitical premium that had been priced in slipping away," said David Tulk, chief Canada macro strategist at TD Securities in Toronto.

The leaders of Ukraine and Russia held talks late Tuesday on resolving the five-month conflict between the two countries. Meanwhile, an open-ended ceasefire in the Gaza war seems to be holding. A quiet economic calendar has left the loonie without many domestic catalysts until the gross domestic product report is released on Friday. Analysts forecast the economy picked up to a 2.7 percent rate of growth in the second quarter, bouncing back from a slowdown in the first three months of the year.

Although there is a risk that growth could accelerate more than the market expects, that is unlikely to cause the Bank of Canada to alter its cautious tone when it releases its monetary policy statement next week, said Tulk. "We’ve seen this from the bank time and time again; anything that looks like it’s either stronger than forecast or something with a seemingly positive undertone, they are inclined to find the dark cloud hanging somewhere out in the distance. That’s their overarching strategy, just to sound as cautious as they can." Canadian government bond prices were higher across the maturity curve to close the trading day.

Short term technicals have shifted to a slightly bearish tone with the break of the 1.0860 support yesterday. The pair is likely to try and test the psychological 1.0800 level in the short term.

Today’s expected trading range is 1.0820 -1.0920

EUR/USD Commentary

The EUR/USD gained in yesterday’s trade to close just shy of the 1.3200 level as traders bought up the cheap currency ahead of today’s US GDP and the upcoming ECB meeting. Eurozone inflation data is due on Friday. Analysts polled by Reuters expect annual inflation to have slowed to 0.3 percent in August from 0.4 percent in July, falling even further below the ECB’s target of close-to-but-below 2 percent.

Last Friday, in stronger language than he has used in the past, ECB President Mario Draghi said the central bank was prepared to respond with “all the available instruments” should inflation drop further. That has seen euro zone bond yields drop to record lows and weighed on the euro. The euro has shed nearly 0.9 percent since Draghi’s comments at Jackson Hole last Friday.

Yesterday’s German Consumer climate reading missed its mark coming in at 8.6 versus 8.9. Still, the consumer sentiment in Germany remains relatively robust given the geopolitical pressures and if the situation with Russia and Ukraine could stabilize, the lower EUR/USD exchange rate could help business demand rebound in Q4.

Short term technicals continue to remain bearish with the next support level located at 1.3105 while resistance is located at 1.3210.

Today’s expected trading range is 1.3150 -1.3225

GBP/USD Commentary

The GBP/USD gained in yesterday’s trade to close in the 1.657’s traders bought up the cheap currency after sending it too low on comments from Deputy Governor Broadbent. There are no events or news from the UK due in the short term. The British currency has been relatively flat against the dollar this week after a more than 6 cent decline since mid-July, when investors were pricing in the chance of an interest rate rise by the Bank of England before the end of the year. Sterling has suffered since then as investors have unwound those expectations, with the currency falling for seven straight weeks against the dollar, its worst run in six years.

Despite minutes last week from the BoE’s latest policy committee meeting showing two of the nine members voting for an immediate rate hike, falling wages and inflation, as well as dovish signals from the central bank, have led many to push back rate rise expectations well into 2015. Data published on Tuesday showed net mortgage lending in July was the lowest since January. Tighter rules on mortgage lending introduced late in April have taken some heat out of the housing market, lessening the impetus for the BoE to introduce new policy measures to cool it down.

Short term technicals continue to remain bearish with support located at 1.6537 while resistance is located at 1.6679.

Today’s expected trading range is 1.6550 -1.6625

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Opening FX Rates (USD)
USD/CAD 1.0860
EUR/USD 1.3185
GBP/USD 1.6586
USD/JPY 103.72
AUD/USD 0.9356
USD/HKD 7.7499
USD/PLN 3.1928
USD/THB 31.95
Opening FX Rates (CAD)
USD/CAD 1.0860
EUR/CAD 1.4316
GBP/CAD 1.8013
CAD/JPY 95.49
AUD/CAD 1.0157
CAD/HKD 7.1365
CAD/PLN 2.9400
CAD/THB 29.42
Opening Commodities (USD)
Oil 93.84
Gold 1291.69
Silver 19.74
Economic and Event Calendar
CAD – Current Account Aug 28
EUR – Germany Unemployment Rate Aug 28
USD – Gross Domestic Product Aug 28
USD – Jobless Claims Aug 28
CAD – Gross Domestic Product Aug 29
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U.S. GDP Shows Expansion of 4.2%, CAD Continues to Outperform

US GDP reports posted an impressive 4.2% for the second quarter compared to the negative 2.1% reported in the previous quarter. U.S. initial jobless claims dropped while the continuing jobless claims rose giving mixed signals for the U.S. labour market. In Canada, the current account report printed negative. The Loonie continues to remain strong after its more than 1 cent move yesterday.

European stocks fell from a one-month high as investors weighed valuations and as pro-Russian rebels widened their attack on Ukraine’s forces. Euro-area economic confidence fell more than forecast, Spanish consumer prices dropped the most in five years and German unemployment unexpectedly rose in a burst of data backing Mario Draghi’s warning that more stimulus may be needed.

Three weeks before Scotland votes on whether to become independent, the pound held on to recent gains versus the dollar amid speculation the debate on whether the nation will leave the union will not weigh on the U.K. currency.

At the time of writing the USD/CAD is trading in the high 1.08’s, EUR/USD is trading in the low 1.32’s and GBP/USD is trading in the Low 1.66’s.

Tim Hortons Now Owned by Burger King, Merger Supports Loonie

Gold prices rose above $1,285 an ounce today, recovering from a two-month low the previous week. Stocks took a breather after a 2-1/2 week rally and the U.S. dollar came off recent highs against the Canadian. The dollar also slipped against most majors this morning and seems to be in consolidation mode ahead of tomorrows’ GDP release.

The euro rose from its lowest in almost a year after Germany’s finance minister said comments by European Central Bank President Mario Draghi advocating support for euro-zone fiscal policy were “over-interpreted.”

The pound edged higher against the U.S. dollar today, as investors locked in profits following the greenback’s recent strengthening and as trading volumes are expected to remain thin in the absence of any major economic reports from the U.S. throughout the day.

At the time of writing the USD/CAD is trading in the mid 1.09’s, EUR/USD is trading in the low 1.32’s and GBP/USD is trading in the Low 1.66’s.

USD Trims Gains On Thin Trade

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Neutral. Spot at 1.0905
EUR/CAD: Bearish. Spot at 1.4364
GBP/CAD: Bearish. Spot at 1.8075
EUR/USD: Bearish. Spot at 1.3177
GBP/USD: Bearish. Spot at 1.6580
Today’s Commentary
USD/CAD Commentary

The Canadian dollar declined to its lowest level in three months versus its U.S. peer and almost reached the 1.10 technical level before retracing to close in the mid 1.09’s. The Loonie was higher on Tuesday as traders digest major Canadian corporate deal making and look ahead to key data out at the end of the week.

Burger King announced it is buying Tim Hortons in a cash and stock deal worth about US$11 billion that will create the world’s third-largest quick service restaurant company. The deal that will see the parent of the U.S. firm, 3G Capital, own 51 per cent of the new entity. Depending on the structure of the deal, it could have an impact on the dollar.

Canadian dollar has been pushed higher in the past by big corporate deals. That’s because a foreign buyer acquiring a Canadian company will need Canadian currency to close the deal, boosting demand for the loonie on financial markets. Meanwhile, Statistics Canada releases the June reading on gross domestic product growth on Friday. Economists expect that Statistics Canada will report that GDP grew by 0.2 per cent in June, which would translate into annualized growth of 2.6 per cent.

In the U.S., durable goods orders during July jumped 22.6 per cent, reflecting a huge jump in orders at aircraft giant Boeing. Excluding transportation, orders actually declined 0.8 per cent.

The BoC meets on September 3rd, but there will be no press conference by Governor Poloz, leaving the market with just the statement. Over the weekend, Governor Poloz struck a dovish tone suggesting that inflation is in the middle of the BoC’s target zone and predicts lower readings over the next several months. Poloz continues to reiterate the need for the Canadian economy to move away from a domestic household spending to a more export oriented economy. In short the BoC continues to drive toward a weaker CAD.

Short term technicals continue to remain mixed with support located at 1.0887 while resistance is located at 1.1000. A break above the 1.10 level would open up tests to the 1.1050 and 1.1083 levels.

Today’s expected trading range is 1.0860 -1.0950

EUR/USD Commentary

The EUR/USD remained weak and held below the all important 1.32 level yesterday to close at 1.3710. Soft comments from ECB Draghi at the Jackson Hole conference kept the euro under pressure. There are no major data releases today, however, there continues to be an onslaught in European bond yields as the markets position for further policy action by the ECB. The next ECB policy meeting is on September 4th; leading into the meeting are two key data points that will dictate the direction of the next policy move. The flash CPI data release this Friday and the eurozone GDP data release next week will be closely watched.

Short term technicals continue to remain bearish with the next level of support located in the 1.3150’s. A break there could open up the low 1.31’s and below.

Today’s expected trading range is 1.3140 -1.3195

GBP/USD Commentary

The GBP/USD ended yesterday’s trading day lower after mortgages missed expectations. The pair closed the trading day at to trade at 1.646. The economy is still on life support and could be further endangered by an overheating housing market, U.K. Business Secretary Vince Cable has warned, according to U.K. newspaper The Times Monday. He cautioned that there was a need to be “realistic” about the strength of the recovery, emphasizing that underlying problems still posed a threat, The Times said.

“We are clearly now getting a recovery . . . but we’ve got to be realistic. The patient is still on a life-support system with these ultra-low interest rates and very unorthodox monetary policy,” he said. “We have this potentially destabilizing impact of the housing boom, and we have other issues like currency moving into overvaluation territory, making it more difficult to rebalance.”

Short term technicals continue to remain bearish with support located at 1.6501 while resistance comes in at 1.6686.

Today’s expected trading range is 1.6550 -1.6620

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Opening FX Rates (USD)
USD/CAD 1.0905
EUR/USD 1.3177
GBP/USD 1.6580
USD/JPY 103.93
AUD/USD 0.9341
USD/HKD 7.7498
USD/PLN 3.1762
USD/THB 31.92
Opening FX Rates (CAD)
USD/CAD 1.0905
EUR/CAD 1.4364
GBP/CAD 1.8075
CAD/JPY 95.30
AUD/CAD 1.0184
CAD/HKD 7.1085
CAD/PLN 2.9128
CAD/THB 29.28
Opening Commodities (USD)
Oil 93.58
Gold 1286.91
Silver 19.51
Economic and Event Calendar
USD – Mortgage Appliations and Oil Stock Change Aug 27
EUR – Germany Unemployment Rate Aug 28
USD – Gross Domestic Product Aug 28
USD – Jobless Claims Aug 28
CAD – Gross Domestic Product Aug 29
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US Dollar Continues to Shine

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Neutral. Spot at 1.0964
EUR/CAD: Bearish. Spot at 1.4465
GBP/CAD: Bearish. Spot at 1.8171
EUR/USD: Bearish. Spot at 1.3194
GBP/USD: Bearish. Spot at 1.6574
Today’s Commentary
USD/CAD Commentary

The dollar firmed against most major currencies yesterday despite softer-than-expected data out of the U.S. housing sector, as markets took up positions betting that the Federal Reserve will tighten policy while its counterparts in Europe and Japan stay loose. The Federal Reserve Bank of Kansas City’s annual Jackson Hole symposium wrapped up leaving investors preparing for diverging monetary policies across the globe.

The dollar remained supported after Fed Chair Janet Yellen said on Friday that the U.S. economy is recovering and added the labor market is improving as well. Friday’s meeting continued its impact on the U.S. dollar as it rose against its Canadian counterpart on Monday, to trade near three-and-a-half month highs. Bank of Canada Governor Stephen Poloz said the central bank has scope to keep interest rate near historic lows even if employment picks up. Poloz also said investors who think he favors a weaker Canadian dollar are mistaken. It’s to be expected that the currency would weaken at a time when the US economy is gathering momentum. Poloz cut his forecasts for economic expansion last month, predicting the country will take two years to return to full output, in part due to what he called ’’serial disappointment’’ with global growth.

U.S. dollar appreciation tends to fizzle and the performances became mixed after the first actual increase in the Fed’s target for the federal funds rate. The Fed has kept the benchmark rate at a record-low zero to 0.25 percent since December 2008, while futures traders saw about a 56 percent chance the central bank will start raising rates by July 2015. The July Federal Open Market Committee meeting showed policy makers discussed the possibility that jobs gains may lead them to increase rates sooner than anticipated.

Canadian stocks rose to a record amid optimism that central banks worldwide will keep interest rates low. Tim Hortons Inc. surged on merger talks. Canadian consumer confidence is hovering around its 12-month average amid mixed signals about the strength of the world’s 11th largest economy.

Today, expect markets to move on U.S. durable goods and consumer-confidence data. No economic reports in Canada today or tomorrow as the markets look forward to GDP numbers on Friday. In the US tomorrow there is Oil Stock change report along with MBA mortgage applications. Overall expect a light day tomorrow.

Short term technicals remain bullish with resistance located at 1.1046 while support is located in the 1.0885.

Today’s expected trading range is 1.0935 – 1.1010

EUR/USD Commentary

Yesterday, the euro fell to a near one-year low against the dollar and euro zone stocks and bonds rallied as investors positioned for rising chances of further policy easing by the European Central Bank.The euro traded lower against the dollar on Monday even after data revealed U.S. new home sales disappointed in July, as the greenback held firm on broad consensus that the U.S. economy continues to improve despite hiccups here and there.

Earlier on Monday, the German research institute Ifo said its Business Climate Index fell to a more than one-year low of 106.3 this month, below forecasts for 107.0 and down from a reading of 108.0 in July. The weak data dampened optimism over the health of the euro zone’s largest economy.The single currency also came under pressure after European Central Bank President Mario Draghi told the Jackson Hole gathering on Friday that the central bank is ready to take more unconventional action if needed to stimulate a sluggish euro zone economy.

Today is going to be a light day in the Euro Zone with Letras Auction reports from Spain. While, tomorrow expect some volatility as Germany reports the Consumer Confidence numbers as the largest economy of the region will impact on the Euro with its results.

Short term technicals are slightly bearish where the support is located at 1.3175 and resistance at 1.3354.

Today’s expected trading range is 1.3160 – 1.3235

GBP/USD Commentary

The pound edged higher against the U.S. dollar during the start of the week, after downbeat U.S. new home sales data but gains were expected to remain limited as Friday’s comments by Federal Reserve Chair Janet Yellen continued to support the greenback. The Pound has fallen into a trough against other majors of late in stark contrast to the phase of popularity it saw when Governor for the Bank of England Mark Carney hinted that interest rate hikes could take place sooner than expected.

The British asset hit its lowest level against the US currency since April 2012 as UK inflation slowed and inconsistent remarks from Bank of England officials put pressure on the British currency. This week will see some hope for the Pound as Mark Carney again boosted the currency by suggesting that rate hikes could occur despite poor wage growth. The US Durable Goods Orders report is expected to register a 7.6% increase in July. If the data supports the case for a sooner-rather-than-later interest rate increase, the Pound Dollar exchange rate pairing could rally to fresh highs this week.

Looking into the future of the GBP, the British economy will face a quiet week by way of data releases with Thursday and Friday being the only influential days for the currency by way of domestic data. UK reports are of low volatility, fluctuations in the GBP/USD are likely to be caused by US news.

Short term technicals show mixed signals with the support located at 1.6509 while resistance is located at 1.6686.

Today’s expected trading range is 1.6550 – 1.6630

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Opening FX Rates (USD)
USD/CAD 1.0964
EUR/USD 1.3194
GBP/USD 1.6574
USD/JPY 103.91
AUD/USD 0.9313
USD/HKD 7.7501
USD/PLN 3.1689
USD/THB 31.93
Opening FX Rates (CAD)
USD/CAD 1.0964
EUR/CAD 1.4465
GBP/CAD 1.8171
CAD/JPY 94.76
AUD/CAD 1.0208
CAD/HKD 7.0671
CAD/PLN 2.8904
CAD/THB 29.16
Opening Commodities (USD)
Oil 93.58
Gold 1286.91
Silver 19.51
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USD – Durable Goods Orders Aug 26
USD – Consumer Confidence Aug 26
USD – Gross Domestic Product Aug 28
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Mixed Economic Data Weighs On Canadian Dollar

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Market Snapshot (near-term 48 hour outlook)
USD/CAD: Neutral. Spot at 1.0953
EUR/CAD: Bearish. Spot at 1.4451
GBP/CAD: Bearish. Spot at 1.8166
EUR/USD: Bearish. Spot at 1.3195
GBP/USD: Bearish. Spot at 1.6586
Today’s Commentary
USD/CAD Commentary

The Canadian dollar closed unchanged Friday amid a stronger than expected showing on retail sales and tame inflation data.

The loonie was flat at 1.0945 against the U.S. dollar as Statistics Canada reported that the consumer price index for July declined 0.2 per cent, versus the 0.1 per cent dip that economists had expected. This translated to an annualized inflation rate of 2.1 per cent, weaker than the 2.2 per cent reading that was forecast and down from 2.4 per cent the previous month. Retail sales for June jumped 1.1 per cent over May, much higher than the consensus estimate that had called for a 0.3 per cent advance.

The market focus was also on the U.S. Federal Reserve and a key speech from Fed chairwoman Janet Yellen. She offered no signal that she’s altered her view that the American economy still needs Fed support from interest rates that have been near zero since the financial crisis.

The central bank chief also said at the Fed’s annual conference in Jackson Hole, that the Great Recession complicated the Fed’s ability to assess the U.S. job market and made it harder to determine when to adjust interest rates. She noted that while the unemployment rate has steadily declined, other gauges of the job market are harder to assess and may reflect continued weakness. The Fed is generally expected to raise rates mid-2015 but there have been concerns the Fed might move even earlier. Yellen reminded her audience that rate hikes could come sooner than expected if progress in the labour market continued to be more rapid than anticipated or if inflation moves up more rapidly.

Technical factors could play a major role in this week’s price action. Friday’s weak close after Fed Chair Janet Yellen’s Jackson Hole speech suggests her comments about the U.S. economy may have been already factored into the market. While Yellen may have reiterated the Fed’s somewhat hawkish stance, the latest Canadian CPI data suggests the Bank of Canada is likely to maintain its neutral tone.

Overall the USD/CAD seems content to trade on either side of 1.10. A catalyst is needed to move the pair out of its current tight trading range. Support is located at 1.0878 while resistance is located at 1.10.

Today’s expected trading range is 1.0920 -1.1000

EUR/USD Commentary

Support continued to erode for the EUR/USD last week. The strong U.S. economy was the catalyst behind much of the move. The EUR/USD faces similar action this week because of comments from ECB President Mario Draghi who said inflation expectations have deteriorated across the euro area. This is sending a signal to traders that the central bank policymakers are getting ready to add fresh monetary stimulus.

Previously, Draghi had said that worsening inflation would give the ECB a reason to implement broad-based asset purchases, or quantitative easing. Draghi may get his wish later in the week when the ECB is expected to report that eurozone inflation slowed to 0.3 percent in August, the weakest since October 2009.

Volume is expected to taper off throughout the week as many of the major players are expected to head to the sidelines ahead of next Monday’s U.S. Labour Day policy and because of the official end of summer. The thin trading conditions could create pocket of excessive volatility.

Short term technicals continue to suggest further euro weakness. Support is currently located at 1.3161 (September 2013 low) while resistance is located at 1.3287 (August 21 high).

Today’s expected trading range is 1.3160-1.3235

GBP/USD Commentary

The GBP/USD fell for a seventh week as data released last week showed inflation was sputtering. Since inflation was not meeting economist expectations, traders reduced bets the Bank of England is close to raising interest rates, driving prices lower.

The selling pressure continued after the minutes of the BOE’s August meeting showed two MPC members voted for a rate increase this month. Forward contract traders moved expectations of a 25-basis point increase in borrowing costs to May from as early as February last week. Additionally, 10-year government bonds broke a six-week gain.

This week, trading is expected to be light on Monday because of a U.K. bank holiday. The pace of the trade will pick up late in the week with the release of U.K. house-price growth data. This report is expected to show housing prices grew at the slowest pace in 15 months in August.

Fundamentally, there isn’t a report this week that could turn this market higher. However, end of the month position squaring and oversold conditions make the pair susceptible to periodic short-covering rallies.

Short term technicals continue to remain bearish with the pair looking to test the March low of 1.6460.

Today’s expected trading range is 1.6560 1.6630

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Opening FX Rates (USD)
USD/CAD 1.0953
EUR/USD 1.3195
GBP/USD 1.6586
USD/JPY 103.96
AUD/USD 0.9310
USD/HKD 7.7501
USD/PLN 3.1655
USD/THB 31.98
Opening FX Rates (CAD)
USD/CAD 1.0953
EUR/CAD 1.4451
GBP/CAD 1.8166
CAD/JPY 94.84
AUD/CAD 1.0196
CAD/HKD 7.0748
CAD/PLN 2.8899
CAD/THB 29.19
Opening Commodities (USD)
Oil 93.81
Gold 1278.63
Silver 19.41
Economic and Event Calendar
USD – New Home Sales Aug 25
USD – Durable Goods Orders Aug 26
USD – Consumer Confidence Aug 26
USD -Gross Domestic Product Aug 28
CAD – Gross Domestic Product Aug 29
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