GFX Morning FX Commentary August 20th, 2013

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is 1.0335-1.0400

Today’s expected range for the Canadian Dollar against the Euro is 1.3850-1.3925

Today’s expected range for the Canadian Dollar against Sterling is 1.6220-1.6300

The US Dollar is mixed this morning as it is weaker against the Euro and Sterling but stronger against the Commodity currencies. Overnight Asian and European equity markets are all lower on the back of the US 10 year interest rate rising to near the  3.0% level overnight (bonds just like currencies are traded 24 hours a day). Clearly global investors are betting that the US Federal Reserve will start to turn off the taps on stimulus, this has the effect off pushing interest rates higher and equities lower, as we have seen the Dow Jones in negative territory  the last four sessions.

In the Asian markets both the Indian Rupee and the Indonesian Rupiah hit new lows as the flows out of these emerging markets continues to flourish despite government intervention. Of interesting note is the fact that none of these monies are moving into Canada, the Canadian Dollar continues to slowly lose ground to the US Dollar and is losing ground to the Euro and Sterling a bit quicker. In New Zealand the Central Bank said they will impose bank lending restrictions and in Australia the Central Bank minutes indicated that further interest rate cuts are likely in the near future, clearly all commodity currencies are on the defensive at the moment.

As I expected USD.CAD continues to move towards the 1.0400 level on the back of the overall weakness in the commodity currency markets, with the lack of positive economic data coming out of Canada and the pressure that a possible slowdown in stimulus by the US Federal Reserve is having on the US Dollar at the moment I look for USD.CAD to hit the 1.0400 level and possibly higher in the next day or two.

Up today we do get some trade data for Canada but that will most likely be ignored by the Canadian market as the pressure will remain for the US Dollar to rise on the back of the higher US interest rates. We are spending more time these days watching the bond market in the US as it is starting to have a dramatic effect on other financial markets and is indicating which way the US Dollar is going to move.

Short-term US Dollar buyers should be ready for any pullback towards 1.0350 and US Dollar sellers should leave their orders at the 1.0375 to 1.0400 levels to take advantage of this move.

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0372			1.0339
CAD/USD		0.9641			0.9672
EUR/USD		1.338			1.336
EUR/CAD		1.388			1.3816
STG/CAD		1.6244			1.6184
AUD/CAD		0.9405			0.9467
CAD/JPY		93.74			94.8
CAD/CHF		0.8874			0.8948
CAD/HKD		7.4545			7.4781
CAD/CNY		5.9023			5.92
CAD/MXN		12.5945			12.6098
Commodities
Gold		$1,305.00			$1,374.00
OIL		$106.54			$107.13
US DOLLAR INDEX
P.CLOSE		81.28			81.34
OPEN		81.09			81.27
US 10YR YIELD		2.88%			2.83%