Canadian Foreign Securities Purchases Actual C$6.11b, Expected C$1.28b, Previous C$10.43b
Release Explanation: Foreign Purchase numbers, or International Transactions in Securities (full title), measures the flow of assets classes including bonds, stocks and money market instruments that are purchased by overseas investors. “The numbers are important to monitor since foreign investment can only be done once foreign currency has been swapped into Canadian dollars. Unlike the U.S. which relies on TIC data flows to fund the Trade and Current Account balances, Canada relies as much on outflows of manufactured and raw exports.” TheLFB-Forex.com Trade Team said.
TheLFB-Forex.com Trade Desk Thoughts: The rate of investment flows into Canada was lighter than in the previous month, but a long way above the expected read, in a signal that money market assets were still attractive to overseas buyers. Canadian investors sent C$2.9b out to overseas investment, leaving a net positive flow. Increased government borrowing in Canada and in the United States, along with declining global equity prices, maintained cross-border portfolio investment activity in February. The Canadian bond market remained robust, and attractive to foreign purchasers.
Money that flows in to, or out of, Canadian markets will impact the C$ over time as an increase in overseas investments can only be funded in C$. A local currency is being sold, C$ are bought, and then those dollars are transferred into money market assets.
“By the time this report is released the process of swapping Currencies has already happened and may not have an instant impact on the Cad values” TheLFB-Forex.com Trade Team said. “It does however give a good idea of Canadian economic sentiment, however the global economic slowdown really has impeded these reports in their ability to reflect desire to invest in an overseas region. Right now these reports reflect little more than book balancing and swapping currencies at a very base level”.
Forex Technical Reaction: The cad had moved heavily overnight in reaction to lower global equity markets dropping. The 20 day SMA area at 1.2330 had already been breached, and this report is unlikely going to be strong enough to reverse that. Other equity/oil based moves may take precedence in trade on Monday.
The Cad is in retracement mode at the moment, probably trading in a red wave iv) retrace after wave iii) hit the bottom in the past week, around the 1.1980 area. The LFB-Forex.com Trade Team said. If the wave count is correct then the market should make a turning point somewhere between the 38.2% and 50% retracement of wave iii) distance, around the upper line of the channel. Traders with a short bias should be looking for lower wave v) prices once wave iv) gets done. The first signal for this scenario may appear when we get a break to the downside from the current small bullish channel. The current correction needs to find the top somewhere below the 1.2328 area, otherwise will the wave count be invalidated.
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