Talk about riding a rollercoaster! After the Bank of Canada cut the overnight rate by 50 basis points, USDCAD rallied to a high of 1.0154. The accompanying statement was a bit mixed with the market focusing on the statement that the US slowdown will likely be deeper and more prolonged that initially expected. A longer US slowdown is NOT good for Canada and people started selling the Canadian dollar. However, we didn’t go screaming towards 1.02 because the Bank of Canada also indicated they will take a step to the sidelines and watch domestic and global developments before deciding what to do next.
So we were sitting at 1.0130… what happened?
US existing home sales came out really weak and triggered a small US dollar sell-off. Consequently the Euro started making new highs towards the psychological 1.60 area. As the market tried to take out this level, the US dollar continued to sell-off. Adding to the mix, crude’s now trading at $119.43/bbl and still looks very bid. These factors alongside a big order to sell USDCAD at the Bank of Canada noon took us to the low of 1.0025.
Where do we go from here?
The market looks heavy and is poised to try to take out par again. That being said, nothing’s really changed and we’re still very range-bound in a medium-term 0.9750 - 1.0350 range. Anything’s fair game right now between 1.00 and 1.01.
Hang on for the ride!
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