EUR/USD, CAD, Cable in the Spotlight Ahead of Heavy Outlay of Drivers

Talking Points:

• Currency markets flared with a brief dose of excitement this week as a quick blip of USD-strength showed around the FOMC rate decision. But that strength was fleeting, and sellers have come-back into USD.

• A heavy outlay of data and drivers for next week can keep markets volatile in the near-term. We look at three of the more pressing price action themes in FX-land below.

In what’s already been a rather eventful week across global markets, we have two more high-impact drivers to get through ahead of the weekend with Canadian CPI and a pivotal speech from British PM, Theresa May. But next week is loaded with high-impact prints, and there’s a heavy emphasis of U.S. data with significant releases offered every day Tuesday-Friday. Also of interest are weekend elections in New Zealand and Germany; a speech by Fed chair Janet Yellen on Tuesday, European inflation figures and an RBNZ rate decision on Wednesday evening (Thursday morning in New Zealand). We also hear from Kuroda of the BoJ, William Dudley of the Fed, and Mario Draghi on Monday. So, next week is loaded with drivers.

Below, we’re looking at three of the more pressing price action themes as we head into a heavy outlay of data points.

USD/CAD

The Canadian Dollar will likely remain on the move in the immediate future. At 8:30 AM ET on Friday morning, we get Canadian CPI and this has very much been at the forefront of the recent hawkish shift seen at the Bank of Canada. Since hiking rates for the first time in over ten years in July, the Canadian Dollar has been on a rampage, and USD/CAD has plummeted through multiple zones of support in the process. Just ahead of the Bank of Canada’s rate decision earlier in the month, we noted a key trend-line that’s held in USD/CAD since 2012. Ahead of that rate decision, prices were finding support off of this trend-line, but after the BoC hiked rates again, CAD strengthened, the trend-line gave way and prices moved-down to a fresh two-year low.

We noted a series of bear traps on the pair in subsequent webinars, and yesterday we looked at that prior support trend-line beginning to show as resistance after the FOMC-fueled pop in the U.S. Dollar. Next week brings a couple of key drivers out of Canada: BoC Governor, Stephen Poloz is giving a speech on Wednesday afternoon, and Canadian GDP is released on Friday morning.

USD/CAD Weekly: Prior Support Trend-Line Now Showing as Resistance