Morning Commentary & Currency Insights – November 12, 2018

The DXY continues to climb fueled by Brexit flaring up with the Euro threatening long term lows on Italian concerns as their rift with the EU continues to grow.  The North American banking holiday today will make for a quiet session as we look forward to UK & U.S. inflation numbers due out Wednesday, while Australian unemployment and UK & U.S. retail sales data on Thursday round out the week.  With the light economic calendar scheduled for this week we look for equities & commodities (especially oil) to be the main drivers outside of the data mentioned above.

The Canadian dollar suffered one of its worst weeks in months as the combination of weak oil prices, a US court order stopping the Keystone pipeline construction, and American and Canadian trade reps arguing over some of the fine print of the new USMCA didn’t help the CAD.  Over the weekend, “Saudi Arabia’s intent to cut oil production supported crude prices with the loonie the only major currency gaining versus the dollar.” (Bloomberg) Not much to talk about in Canada until retail sales and CPI data on Friday, Nov 23 which could prove monumental in determining where the CAD heads in the medium term.  As the BoC has made it very clear they are data dependent, a string of weak data will leave the Canadian dollar vulnerable to further selling.  We broke above a 3 year trend line on Friday at 1.3189 which now provides support. Momentum indicators are still in extreme overbought territory, however fundamentals are outweighing technicals in the current environment.  Short term pivot points will be 1.3170-80 below and 1.3280-90 above.