Loonie settling in for a summer siesta
- UK referendum polls driving G10 trading
- US election bigger FX risk than Brexit
- USDCAD will remain rangebound with oil
By Michael O'Neill
Fortunately, the UK has most of it covered. FX traders will be pretty lazy while they wait for the British to vote on Brexit; the poll results are still very hazy; and the aftermath will be crazy.
The only sure thing is that when the vote is tabulated, GBPUSD will not be where it is sitting now.
Picking your poison
What is more destabilising? A European Union without the UK or the USA with President Donald Trump? For Brits, it is obviously the former as leaving the EU will have repercussions that they will have to deal with for years, both good and bad. For all others, President Trump has to be seen as a nightmare from a stability perspective.
Further field? Well, put up your dukes, China, as Trump will pick a fight with Beijing by declaring the country a currency manipulator which would allow him to impose countervailing duties on all Chinese imports.
USDCAD in focus
The loonie had its turn in the spotlight twice this year. The first time was when oil prices were plunging and WTI hit $26.02/barrel in February, and the second time was when oil probed resistance at $51.80/b two weeks ago.
Bank of Canada governor Stephen Poloz delivered a fairly upbeat assessment on the economy last week. He scaled back the forecast for the impact of the Alberta wildfires on GDP and expects a decent pickup in growth in the second half of the year, in part due to the government’s fiscal stimulus plan.
The intraday USDCAD technicals turned bullish with this morning’s breach of the minor downtrend channel at 1.2790. The break points to additional gains to 1.2870 which represents the 50% retracement level of the June 1.2652-1.3082 range.
Longer term, the uptrend line from the January 2015 BoC surprise rate cut day remains intact while prices are above 1.25-30, supporting the argument that USDCAD is locked in a 1.25-1.31 trading band for the time being
The 1.2860 area will act as a pivot; above targets 1.3100 while below keeps 1.2500 in play.
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— Edited by Michael McKenna