Daily Forex Commentary

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Wednesday, 16 May 2012 - Market Commentary

By Frederick Cheng

US Dollar vs Canadian Dollar

The top so far has been 1.0132 and we are officially out of our range. The FX markets continue to shed risk lead by sell offs in commodity based currencies. This move has caught people off guard and may extend further. U.S. dollar sellers are abundant vs the CAD but we should continue higher towards the 1.0250 target area in coming sessions. Pull backs should be limited to the 1.0040-50 zone with 1.0020 being the outlier target. Below .9980 will see us get back to lower levels but that is not the current favoured scenario. A breach of 1.0160 will target higher levels.

We expect a range today of 1.0050 to 1.0150

Canadian Dollar vs Euro

The Euro traded relatively flat against the Loonie, staying within yesterday’s range as both the currencies dropped against the USD. Greece will hold another election in mid June after the country failed to form a coalition government, further adding to the political uncertainly in the euro area.

We expect a range today of 1.2790 to 1.2880

Canadian Dollar vs British Pound, Australian Dollar and New Zealand Dollar

The Sterling is trading within this week’s lower range against the Loonie after a dovish BoE inflation report. The pair appears to have formed a short term top at the 1.6200 area which should cap the GBP’s appreciation against the Loonie in the short term. Immediate support comes in at 1.5980. The Aussie regained its ground after testing a new low at the 0.9983 area. On the data front, Australia Consumer Confidence and wages recorded a modest gain. The Kiwi continues its path lower as commodity prices weigh heavily on the Kiwi.

Data Releases

CAD: Manufacturing Sales

AUD: MI Inflation Expectations

EUR: Italian Trade Balance, CPI, Core CPI, Trade Balance, German 10 year Bond Auction

GBP: Claimant Count Change, Unemployment Rate, Average Earning Index, BOE Inflation Report

JPY: Prelim GDP, Prelim GDP Price Index

NZD: PPI Input, PPI Output

USD: Building Permits, Housing Starts, Capacity Utilization Rate, Industrial Production, Mortgage Delinquencies, Crude Oil Inventories, FOMC Meeting Minutes

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