Most markets were very quiet once again during the London morning, with month-end upon us. Poor investor returns in February have kept the desire to put new trades on very limited this week. The Chinese ‘sideshow’ is also probably limiting the degree of risk appetite somewhat. Ranges within the G10 FX space were once again very tight, but USD returns were mixed.
We’re watching the same levels as yesterday in USDCAD. With the pair already ‘priced’ for a weak GDP print (due Friday), resistance is expected at 1.110, with even better offers likely in the 1.113-1.115 range. On the downside, we look for support in the 1.105-1.1025 range. We’d expect a break of that range to be tough for the time being, and so we’ll initially be looking to buy the dips into those levels.
Neither the broader ‘EM’ situation (which appears to have stabilised) nor the Chinese one have dramatically impacted global growth or commodity demand expectations yet, but this is something that needs to be continuously watched. We expect ‘choppy’ price action in USDCAD, should these negative developments occur. On the one hand, short CAD positions may be squared up if risk aversion increases sharply and US bond yields fall. On the other hand, USDCAD should eventually succumb to solid bids (1.085-1.095) if oil prices eventually start to tumble.
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BMO