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Tag Archives: CAD

Politics Not Economics is Driving the Markets

The US dollar has been correcting lower since mid-December.  Interest rates have begun moving in the dollar's favor, and the equity market is again knocking on record highs.  The US economic data, coupled with Fed comments, keep the Fed on track to hike rates. Even with the weaker than expected wage growth in January, investors saw a greater chance of a June hike.  Yellen has warned of a "nasty surprise" if the Fed waits too long, and even the dovish Chicago Fed President...

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Dollar Turn Remains Elusive

The end of the US dollar's downside correction, which we see having begun in mid-December, following the Fed hike rather than the start of the New Year, is proving more elusive than we anticipated.  Our reading of the technical condition and the weak close before the weekend warns of the downside risks. The verbal intervention by the new US Administration and the unexpected weakness in wage growth may be factors extending the correction.  Nevertheless, we continue to view...

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Specs Cover Short Euro and Yen, but Buy the Aussie

Speculative activity picked up in the latest CFTC reporting period ending January 24.  There were three gross position adjustments of more than 10k contracts.   Speculators covered 11.1k previously sold euro futures to reduce the gross short position to 184.3k contracts.  Though it still is large, it reflects a 30% reduction from the peak in late October.  Since then the gross long position has been essential flat.  The fact the euro's gains in the spot market reflects...

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State of the Dollar’s Downside Correction

The US dollar spent the first month of the new year correcting lower after a strong advance in the last several months of 2016. We argue that the correction actually began in mid-December following the Federal Reserve's rate hike.  Over the last two week, we have been cautioning that greenback's downside momentum was fading and the correction was coming to an end.  We retain that view and have been encouraged by the recent price action. The Dollar Index found a base...

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Week Ending on Mixed Note as Year of Rooster Begins

The Lunar New Year celebration thinned participation in Asia, where several centers are closed.  Although the MSCI Asia Pacific Index slipped slightly, it rose 1.5% on the week, the fourth weekly gain in the past five weeks.  The Nikkei advanced 0.35%, the third rise in a row.  The 1.75% gain for the week snaps a two-week decline.  The pullback in the yen this week lent support to Japanese equities.  The yen is off about 0.5% today against the dollar, which is trying to...

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Dollar’s Pre-Weekend Retreat Extended in Asia Before Stabilizing in Europe

The US dollar had a poor close in the North American session before the weekend as investors appear increasing anxious about the new US Administration's economic policies and priorities.With no fresh details emerging over the weekend, some stale dollar longs exited.  The dollar stabilized in the European morning, but broader risk appetites were not rekindled, and the Dow Jones Stoxx 600, led by financials, was sold to its lowest level this month.   Asian shares did better,...

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Dollar Still Appears to Carving out a Bottom

The US dollar turned in a mixed performance over the past week. The technical indicators continue to support our expectation that after correcting since mid-December, following the Fed's hike, the dollar is basing.  A seemingly necessary precondition is higher US rates.  The US 10-year yield bottomed near 2.30% early last week and finished near 2.45%, after having pushed through 2.50% earlier..  The 2.50%-2.57% area is a band of congestion from last month.  The March...

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Trump Day

The 45th President of the United States will be sworn in today, and the heavy cloud of uncertainty over priorities and policies will begin being lifted.  Much of the focus in the media has been soon-to-be President Trump's comments about the dollar being too strong, partly because of the Chinese yuan.  Mnuchin, the Treasury Secretary nominee, sought to clarify Trump's remarks, suggesting that they were not meant to be a long-term policy endorsement.  Indeed, at the ECB's...

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Markets Stabilize, Awaiting Fresh Cues

The US dollar has stabilized after yesterday's bruising.  From a fundamental perspective, little has changed. After hard exit signals from the UK government sent sterling down from $1.2430  on January 5 and 6, to below $1.20 at the start of the week, the pound rallied back to almost $1.2430 yesterday amid "sell the rumor buy the fact" activity.  It was helped by comments about the US dollar from US President-elect Trump and an advisor at Davos.  Of all the things that...

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Dollar Correction may be Over or Nearly So

The correction in the capital markets began shortly after the Federal Reserve hiked rates on December 14.  The correction or consolidative phase follows an otherwise strong trending quarter, where moves accelerated after the unexpected victory by Trump. Last week we still anticipated the correction could persist even after the January 4 US jobs report showed more earnings growth than expected. However, now after the additional losses, the dollar appears ready to turn....

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