• USD/CAD finally catches a bid on the central bank divergences.
  • CAD hits the downside target of prior support/resistance 61.8% Fibo confluence.

This was the week: 

Traders were buying risk-on assets from the get-go with an announcement that the had been a phone call between the top US and Chinese trade officials seeking amends to the protracted dispute with October being the most likely tabletop meeting and to take place in Washington. Then followed a steady hand from the Bank of Canada, a disappointment in the US ISM manufacturing and headline Nonfarm Payrolls while Canada pulled off a solid performance on the data front, ceiling the deal for a burst to the downside in Funds. 

Key CAD events:

While holding their interest rate steady, the Bank of Canada left a message of confidence in their recent statement and announcements which stressed Canada has proved more resilient to global headwinds, and that monetary policy decisions will take into account these unique circumstances. "We still look for the impact of headwinds to intensify into year-end but today's report should dampen some of the speculations around a potential cut in October," analysts at TD Securities explained. 

Meanwhile, the Canadian employment surged by 81k in August, which smashed expectations where the consensus was for 20k. However, under the hood, there was a sharp pickup in private employment and softer wage growth, but all in all, this report has dampened the speculation around an October rate cut, though the disappointment in wages will offer some cause for pause for thought and likely limit how far the loonie can really take off. 

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Sep 05
15:45
 
 
Friday, Sep 06
12:30
5.7%
5.7%
5.7%
12:30
3.78%
 
4.50%
12:30
81.1K
15.0K
-24.2K
12:30
65.8%
65.7%
65.6%
14:00
58.6
 
51.2
14:00
60.6
53.0
54.2
Tuesday, Sep 10
12:15
 
204K
222K
12:30
 
 
-3.7%
Wednesday, Sep 11
12:30
 
81.0%
80.9%
Thursday, Sep 12
12:30
 
 
-0.1%
12:30
 
 
-0.2%

Key U.S. events:

ISM Manufacturing and Nonfarm Payrolls, as well as a series of Federal Reserve speakers,  were on tap for the week passed, and not all was rosy for the Dollar. The ISM manufacturing survey for August surprised to the downside on both its activity and employment components - At 49, the index is now below 50 for the first time since August 2016 with all its key components declining to contractionary territory: New orders at 47.2, production at 49.5 and employment at 47.4. On net, the survey reiterated the outlook for manufacturing remains subdued (it is already on a technical recession) amid a slowdown in global growth and lingering trade uncertainties.

Then came along the Nonfarm Payrolls and Federal Reserve's governor Powell. The August jobs data fell short of expectations at 130,000, below the 158,000 expected although the unemployment rate was unchanged at 3.7%. Powell’s remarks in Zurich were similar to that of his speech in Jackson Hole, repeating the statement that the Fed will ‘act as appropriate to sustain the expansion,’ which indicates that he is leaning toward a September rate cut.

Looking ahead for next week, we have the headline CPI which analysts at TD Securities expect to have slowed a tenth to 1.7% y/y in August (flat m/m) on the back of a notable decline in energy prices.

"Core inflation should tick up a tenth to 2.3% y/y, reflecting a firm 0.2% m/m advance — though slightly softer than in Jun-Jul as core goods inflation was likely flat m/m. That said, a steady 0.2% m/m gain in services should support core CPI."

Retail Sales are expected by the TDS analysts to be a firm increase in sales with the key control group to be the main driver behind a 0.3% headline gain in August as consumer fundamentals remain sound.

"A steady increase in core sales and a small rebound in auto purchases should more than offset a decline in sales at gasoline stations, which reflects a notable drop in gasoline prices in August."

GMT
Event
Vol.
Actual
Consensus
Previous
Friday, Sep 06
12:30
3.7%
3.7%
3.7%
12:30
0.4%
0.3%
0.3%
12:30
3.2%
3.1%
3.3% Revised from 3.2%
12:30
34.4
34.4
34.3
12:30
130K
158K
159K Revised from 164K
16:30
 
 
17:00
738
 
742
19:30
$12.3K
 
$68.5K
19:30
$300.5K
 
$296.8K
19:30
384.2K
 
391.6K
Monday, Sep 09
19:00
 
$16.0B
$14.6B
Tuesday, Sep 10
10:00
 
 
104.7
12:55
 
 
-1%
12:55
 
 
6.5%
14:00
 
 
7.348M
20:30
 
 
0.401M
Wednesday, Sep 11
11:00
 
 
-3.1%
12:30
 
0.2%
-0.1%
12:30
 
2.2%
2.1%
12:30
 
1.7%
1.7%
12:30
 
0.1%
0.2%
14:00
 
0.2%
0.2%
14:30
 
 
-4.771M
Thursday, Sep 12
12:30
 
219K
217K
12:30
 
 
216.25K
12:30
 
 
1.662M
12:30
 
0.1%
0.3%
12:30
 
256.440
256.571
12:30
 
 
263.569
12:30
 
1.8%
1.8%
12:30
 
2.3%
2.2%
12:30
 
0.2%
0.3%
14:30
 
 
84B
16:00
 
 
18:00
 
 
$-120B
Friday, Sep 13
12:30
 
0.1%
1.0%
12:30
 
0.2%
0.7%
12:30
 
0.3%
1.0%
12:30
 
 
-0.9%
12:30
 
-0.3%
0.2%
12:30
 
 
-1.8%
12:30
 
-0.3%
0.2%
14:00
 
90.5
89.8
14:00
 
0.2%
0.0%
17:00
 
 
738
19:30
 
 
$12.3K
19:30
 
 
384.2K
19:30
 
 
$300.5K

USD/CAD Technical Analysis

Funds dropped in the latter part of the week, with a bearish pin-bar and subsequent engulfing sticks to the downside which keeps bears back below the 200-day moving average, now resting at the prior support/resistance 61.8% Fibo confluenceWe still have that confluence of the 200-DMA and a 23.6% Fibo which bulls need to overcome. A resumption of the downtrend will be back in vogue here, targetting the 1.28 handle - On the flipside, 1.3350 is the near-term target to break still on the upside which guards the 1.34 handle and mid-June highs. 

USD/CAD daily chart


 

USD/CAD Forecast Poll

1 Week
Avg Forecast 1.3168
100.0%64.0%27.0%02030405060708090100
  • 27% Bullish
  • 37% Bearish
  • 36% Sideways
Bias Bearish
1 Month
Avg Forecast 1.3213
100.0%84.0%48.0%04550556065707580859095100105
  • 48% Bullish
  • 36% Bearish
  • 16% Sideways
Bias Bullish
1 Quarter
Avg Forecast 1.3233
100.0%76.0%44.0%0405060708090100
  • 44% Bullish
  • 32% Bearish
  • 24% Sideways
Bias Bullish

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