- August 20, 2018
- Posted by: Joey Benedid
- Category: Market News
After surprising inflation data out of Canada on Friday morning, the Canadian Dollar roared back against USD erasing Dollar gains from earlier in the week. CPI Inflation accelerated growth YoY by 0.5% (3.0% vs 2.5%), which is the highest levels we’ve seen since September 2011. Despite traders appearing to be bullish on CAD, current pricing shows only a 29.7% chance for a BoC rate hike in September and an 83.8% by the end of the year. The Dollar Index is down slightly today with EM currencies (Lira being the obvious exception) receiving a better risk outlook as we move through 2018. A week long holiday in Turkey will result in less liquidity, resulting in lighter trading. Turkish credit ratings are now in junk territory based on S&P and Moody’s ratings.
As the Lira continues on its downward trajectory, Eurozone banks are still at risk while holding Turkish assets. Lack of liquidity is preventing a major sell off. EUR is mixed as it is a quiet news week for the Eurozone. Talks between China and the US could spur the Dollar, leaving EUR and GBP as causalities. With less than eight months to go, a trade agreement has still not be reached between the UK and the EU, leaving Sterling at the lows we’ve seen over the past couple of weeks.
The Calendar does not pick up until Wednesday with the release of FOMC minutes, ECB Monetary Policy Meeting on Thursday and US Durable goods (-0.5% vs 0.8%) and a Powell speech at Jackson Hole on Friday. Short term support and resistance is 1.2950 and 1.3188 respectively, with RSI at 54 and the 200-day moving average residing at 1.2835.