Short USD/CAD (11-July)
Real-Time AmpGFX – Bought to close USD/CAD short (Wed 7/11/2018 10:44 AM)
Bought half unit USD/CAD at 1.3127 to close short position.
Comment
As mentioned, I have added to the NZD/CAD short, and was looking to get out of the USD/CAD short, so have done that.
Given the volatility in USD/CAD after the policy statement, I wanted to wait to see if the spike would be short-lived. The rebound in USD/CAD seemed excessive and exacerbated by thin nervous markets into and during the BoC press conference.
However, we are seeing a stronger USD develop, with USD/JPY rising above its recent highs, and technically looking like it may have broken support and may run further.
EUR is also weaker and the oil price has fallen sharply. As such, I see a risk that USD/CAD rises for other reasons unrelated to the BoC policy direction.
However, I like the short NZD/CAD on a more sustained basis. Rates are going up in Canada, and they are going no-where in NZ, possibly even lower. They are expected to cross over at some stage, soon.
Positions
Long half unit of EUR/AUD at 1.5824; s/l 1.5673; t/p 1.7234
Short half unit NZD/CAD at 0.8914; s/l 0.9013; t/p 0.8513
Short half unit NZD/CAD at 0.8914; s/l 0.9013; t/p 0.8513
Long half unit GBP/NZD at 1.9494; s/l 1.9233; t/p 2.0623
Real-Time AmpGFX – Sold NZD/CAD, adding to short, watching USD/CAD closely (Wed 7/11/2018 9:18 AM)
Sold half unit of NZD/CAD, adding to short
Comment
My preference is to manage the CAD long through NZD, taking out the USD component.
The rebound in USD/CAD from lows since the BoC statement reflects some USD strength.
My intention is to close the USD/CAD short, but want to wait and see how the market develops, this could be a short-lived bounce in USD/CAD, and will be watching it closely.
Positions
Short USD/CAD half unit at 1.3100
Long half unit of EUR/AUD at 1.5824; s/l 1.5673; t/p 1.7234
Short half unit NZD/CAD at 0.8914; s/l 0.9013; t/p 0.8513
Short half unit NZD/CAD at 0.8914; s/l 0.9013; t/p 0.8513
Long half unit GBP/NZD at 1.9494; s/l 1.9233; t/p 2.0623
Real-Time AmpGFX – Initial BoC comment – sticking to gradual (Wed 7/11/2018 8:25 AM MT)
The point I was looking for in the statement was if they retained “gradual” and did not revert to “cautious” in their final paragraph. As I discussed in the AmpGFX report https://ampgfxcapital.com/reports/bank-of-canada-may-pick-up-the-pace/
Final para: (staying on a gradual tightening path)
“Governing Council expects that higher interest rates will be warranted to keep inflation near target and will continue to take a gradual approach, guided by incoming data. In particular, the Bank is monitoring the economy’s adjustment to higher interest rates and the evolution of capacity and wage pressures, as well as the response of companies and consumers to trade actions.”
The overall growth outlook remains unchanged, for somewhat above-trend growth over the horizon:
“Overall, the Bank still expects average growth of close to 2 per cent over 2018-2020.”
The description of the domestic economy:
“Recent data suggest housing markets are beginning to stabilize following a weak start to 2018. Meanwhile, exports are being buoyed by strong global demand and higher commodity prices. Business investment is growing in response to solid demand growth and capacity pressures, although trade tensions are weighing on investment in some sectors.”
Views on wages and inflation largely the same as the April MPR:
“CPI inflation is expected to edge up further to about 2.5 per cent before settling back to 2 per cent by the second half of 2019. The Bank estimates that underlying wage growth is running at about 2.3 per cent, slower than would be expected in a labour market with no slack.”
The projections have been dampened by trade risks:
The effects of the steel and aluminum tariffs, and countermeasures “on Canadian growth and inflation is expected to be modest.”
Broader trade uncertainty has reduced outlook since April: “As in April, the projection incorporates an estimate of the impact of trade uncertainty on Canadian investment and exports. This effect is now judged to be larger, given mounting trade tensions.”
Real-Time AmpGFX – sold USD/CAD on BoC statement, comment to follow (Wed 7/11/2018 8:04 AM MT)
Sold half unit USD/CAD at 1.3100
Comment to follow