Forex Investment and Currency Trading

United States and Canada
Event risk: The data calendar rolls on through next week. Tues is existing home sales, with downside risks to this number following the poor NAHB reading earlier this week. On Wed the Q3 GDP revision is likely to be down, while the focus on house prices will be whether the recent stabilisation in prices was maintained in September. The Richmond Fed index is also out on Tues. On Thur, durable goods orders are out, with September’s gain expected to be reversed. Personal spending is expected to fall sharply as households continue the process of balance sheet repair, while the Chicago PMI is unlikely to bounce much from October’s terrible reading.

Bias: The US data pulse remains very downbeat. As long as the data continues to come in below expectations risk aversion is likely to remain elevated. In turn this will see US Treasuries maintain a safe haven demand, something that was a highlight of this week’s TIC data. All up this makes it difficult to be downbeat on the USD; hence maintain the long bias for the week ahead.

CAD Event risk: Some important data releases, starting with October CPI (Friday, tomorrow), and then retail sales on Tuesday, mean currency volatility is in store here. Market forecasts for core CPI is 2.0% (yoy), compared to September’s 1.7%, and the market’s expectation of 1.9%, the increase driven by a weaker CAD.

Bias: Weak CAD bias remains, noting the ongoing slide in. Canada’s key commodity prices and falling demand from its main trading partner, the US. BOC Governor Carney today said the risk of recession is considered higher than it was a month ago, and rate cuts will be commensurate with the level of crisis. USD/CAD should move towards the 1.30 technical targets. CAD/ AUD’s rise since July has corrected somewhat, the narrowing interest rate differential limiting any further falls for now.