Two days into the week and we still find ourselves little change between the dollar and Cable and Euro. Thus far we have seen data to support the weak dollar scenario yet daily resistances for both pairs have pretty much kept them from making any headway with mere knee-jerk reactions giving us daily highs only to close right around the open. Meanwhile brewing trouble elsewhere has actually seen the dollar in a limited rally against its neighbor to the north and with the currency from down-under.Ã‚Â Ã‚Â
Latest releases from Canada have underscored the difficulties posed by a strong currency, while demand for its commodity exports remains strong the higher currency actually means that on a local currency basis we have seen exports dropping accounting for much of the GDP surprise Monday. This in turn has also seen the Bank of Canada going for a more aggressive 50bps easing yesterday, rather note worthy given that decisions by the Governing Council is not a mere vote but consensus that all six members have to agree on. In practical terms this more aggressive policy will now have me searching for possible shorts in the Loonie. Ã‚Â Ã‚Â
For USDCAD this means our daily close above the 0.9895 (38.2 Fib of the drop from 2/20 highs) should be seen as a signal to seek out higher ground. Immediate objective right now would be a return to parity and from there 1.0090.Ã‚Â It has to be noted though that the coming days will sorely test this scenario given the US own vulnerability (if not more so) to poor economic numbers. What is important for core positions at this juncture is that we do not see prices dipping back below the 38.2 Fib levels at 0.9895. Ã‚Â Ã‚Â
Our other mover Tuesday was the Aussy seeing numbers of its own with another rate hike to 7.25% and a none textbook reaction of a drop. As previously stated the move was largely expected and in the context of a surprisingly flat Retail Sales for January only underscored a growing belief that this could be the last. With the subsequent fall in the Aussy breaking our trendline from Jan-22 lows in AUDUSD we are now in search of a confirmation for this break an immediate objective being a close below 0.9263. Consistent with trend break outs we look to establishing new shorts at the pull back towards the trend line with generous stops above it on the odd reentry.Ã‚Â Ã‚Â
Looking ahead we have another one of those days when Eurozone, UK, and US releases are on the same page, what's happening in services?, though I have serious doubts that we are going to get markets reacting much to this. Ã‚Â Ã‚Â
The more interesting results to me will be the ADP hiring figures where median forecasts call for a sharp drop to 17.5. Originally seen to provide a gauge on the official NFP figures from government note that ADP is now also seen as a high impact indicator by itself though its ability to consistently predict the official payroll results is far from desirable. For now I leave you with a number +/- 55,565 (from the median) the allowance I am going to use as a trigger whether to expect the initial volatility that accompanies the release to be sustainable or not.