Daily Economic Commentary: Canada

[PipDiddy]

Check out the 1.0000 handle holdin' like a boss for USD/CAD! The pair may have gapped higher over the weekend but the Loonie held its ground and managed to outpace the U.S. dollar in yesterday's trading. Will the Canadian currency be able to hold on to its gains today?

A relatively upbeat BOC business outlook survey helped keep the Loonie afloat yesterday, as the report showed that the central bank was optimistic about business sales in the near future. Firms included in the survey also expressed their positive outlook for employment and investment among businesses for the coming 12 months.

There aren't any economic reports on Canada's schedule for today, which means that USD/CAD could be swayed by risk sentiment. Bear in mind that China is set to release its trade balance and new loans data today and these could determine whether the risk rallies will continue or not.

[PipDiddy]

And just like that, the Loonie is now zooming out of consolidation! Thanks to broad dollar strength, USD/CAD broke past its recent highs and out of major consolidation to finish at 1.0042, 78 pips above its opening price.

The Canadian dollar succumbed to pressure from the dollar, which benefited from a slight run of risk aversion. If this continues, we may just see USD/CAD make a run back up to its former highs!

For today, all we’ve got is housing starts data coming in at 12:15 pm GMT. Word on the street is that the annualized pace of new residential buildings that began construction in the past month remained steady at 201,000. Remember, this report is a leading indicator of economic activity as the construction of a new building sparks employment. If the report prints a higher-than-expected pace, it could give the Canadian some nice support during the New York session.

[PipDiddy]

The Loonie's really keepin' it tight yo! USD/CAD moved sideways in a small range between 1.0020 and 1.0050 yesterday before closing at 1.0033. Is there any catalyst for a breakout today?

The lack of hard-hitting reports from both the U.S. and Canada probably explains why USD/CAD was stuck inside a 30-pip range the entire day.

Today, Canada is set to print its trade balance and possibly show a slight increase in its trade surplus from 2.1 billion CAD to 2.2 billion CAD in February. A higher than expected surplus could trigger a downside breakout in USD/CAD as this would imply that Canadian exports were stronger during the month. A smaller than expected surplus, on the other hand, might push USD/CAD to the upside since this would signal weaker exports growth for Canada. Keep an eye out for the actual figure due 12:30 pm GMT!

Don't forget that the U.S. is set to release a bunch of top-tier data today as well, so make sure you drop by my U.S. economic commentary if you plan to trade USD/CAD.

[PipDiddy]

The Loonie brushed off yesterday's weaker-than-expected trade data as USD/CAD posted its largest daily gain for 2012. From its opening price, the pair headed straight down the charts to record a 98-pip slide by ending the day at .9944.

Rumors that China would be able to avoid a hard landing helped boost risk appetite and fuel demand for the Loonie yesterday. Market jitters were also calmed by positive signs from Europe, as Italy's bond auction went off without a hitch. Furthermore, the U.S. dollar was weakened by dovish remarks from Fed policymakers. Taken together, these three factors created the perfect environment for the Loonie and its fellow comdolls to rally.

On the domestic front, Canada failed to meet expectations with its trade balance report as its surplus shrank from 1.9 billion CAD to 0.3 billion CAD, instead of widening to 2.2 billion CAD as many had expected. As it turns out, a 3.9% slump in exports and a 0.2% uptick in imports were to blame.

Apparently, energy products, led the decline in exports as it fell 6.9% last month. Ouch! Could this be because of weaker demand from the U.S., its largest trading partner? Just something to think about!

No more Canadian reports to chew on today. In the meantime, if you plan on trading USD/CAD, I suggest you monitor risk sentiment and check out the reports the U.S. will be rolling out later in the day. Good luck, fellas!

[PipDiddy]

After the Loonie took two steps forward on Thursday with its strong rally against the dollar, it took a step back on Friday and pared some of its wins as risk aversion kicked in. USD/CAD bounced from support around .9950 and closed 40 pips above its opening price at .9984.

Concerns about a Spain needing a bailout soured investors' appetite for risk and sent most higher-yielding currencies down the charts. To top it off, the lack of economic reports from Canada only left the Loonie even more vulnerable to market sentiment.

But don't worry! If you're looking to play a news trade on the currency, you'll have the foreign purchases report to sink your teeth into today. It's due at 12:30 pm GMT, and it is eyed to come in at 4.23 billion CAD. Just be careful though. For the most part, I think market sentiment will still continue to dictate today's price action and the effect of the report may not last long.

[PipDiddy]

With the BOC's rate statement just around the corner, it seems the Loonie was in no mood to budge yesterday as it ended virtually unchanged against the Greenback. USD/CAD rose to an intraday high of 1.0034 before it settled at .9998, up just 3 pips on the day. Will today's rate statement finally get it moving?

Foreign securities purchases increased by 12.5 billion CAD in February, which only means that Canadian securities, particularly federal government bonds, were in hot demand. Just like lemonade on a sunny day yo! The actual figure surpassed forecasts which called for 4.23 billion CAD worth of purchases.

Up ahead, we have the much anticipated BOC rate statement at 1:00 am GMT. No one really expects the central bank to hike rates up from 1.00% to 1.25%, but there's a chance we may hear a slightly hawkish tone to the BOC's announcement in light of Canada's recent economic improvements. Don't miss this one, fellas! It could be the major catalyst that you've been waiting for!

[PipDiddy]

Thanks to some hawkish comments from the Bank of Canada, the Canadian dollar trampled all over the Greenback yesterday. USD/CAD dropped an impressive 96 pips to finish just a hair above the .9900 handle. So what exactly did the BOC say?

The BOC rocked the markets yesterday, as it said that its next move may just remove stimulus from the economy soon. Translation? It might be time to raise rates! Yowza!

In addition to that statement, the central bank noted that economic conditions were more stable, and it even raised its growth forecasts for 2012 from 2.0% to 2.4%! But of course, the BOC will be taking a cautious approach and will closely monitor both domestic and foreign economic developments.

For today, the minutes of the latest meeting will be released at 2:30 pm GMT. This will probably reiterate what was said yesterday, but you should still pay attention, as it could give us more insight as to when the BOC plans to raise rates.

[PipDiddy]

What a bore! Economic data released from Canada yesterday didn’t have much of an impact on price action as USD/CAD simply traded in a very tight 50-pip range. The pair found significant support at .9880 and topped out at .9925.

The Bank of Canada (BOC)’s monetary policy report basically just mirrored their interest rate statement on Tuesday. The report said that economic momentum in Canada was slightly firmer than the bank had expected and that global economic growth has greatly improved since January. Because of this, the bank has upgraded its GDP forecast to 2.4% in 2012 and 2013.

No major economic event on Canada’s plate today so we could see USD/CAD continue to trade within a tight range. The only event risk today is the Spanish 10-year bond auction that will take place in the euro zone. It could cause a shift in market sentiment and indirectly affect USD/CAD’s price action. Be careful!

[PipDiddy]

Have the Loonie bulls packed for an early weekend? Though no report was released from Canada, a decline in risk appetite weighed on the comdoll and boosted USD/CAD by 38 pips to .9952. Can you guess what influenced the Loonie bears to take over?

If you guessed concerns about the U.S. economic recovery, then give yourself a pat on the back! Remember that the BOC’s hawkishness, the reason for the Loonie’s strength for the past two days, is mostly based on optimism for economic recovery in the U.S., Canada’s largest trading partner.

But now that initial jobless claims, manufacturing, and housing numbers are putting a dent on investors’ optimism, you can bet your neighbor’s cat that the Loonie traders will take notice!

Will the Loonie bulls give one more push before the week ends? At 1:30 pm GMT we’ll see Canada’s CPI numbers as well as its leading indicator reports. The headline inflation number is expected to rise from 0.4% to 0.5%, while the core figure is seen to slip to 0.3% from 0.4%. Traders are going to look for more signs of an interest rate increase, so keep your eyes on the inflation numbers!

[PipDiddy]

Easy does it, Loonie! The comdoll was finally able to pare some of its losses against the dollar on Friday despite disappointing inflation figures. USD/CAD traded lower after opening the day at .9952. By the day's close, the pair was down at .9925.

The headline CPI figure for March fell short of expectations when it printed at 0.4% while markets were expecting it at 0.5%. On the other hand, the core CPI came in just as expected at 0.3%.

Luckily for the Loonie, risk appetite picked up on Friday because of optimism that the IMF would boost the euro zone's firewall. Hmmm, I wonder if there's still enough good vibes from the news to provide the comdoll with support in today's trading.

Anyway, aside from gauging market sentiment, be sure that you also keep tabs on the wholesale sales report from Canada due later at 12:30 pm GMT. A 0.1% contraction is anticipated but if the actual figure comes in better than expected, we could see the Loonie trade higher. Don't miss it!