An uneasy silence lingers over markets today as they await the next update after comments from President Trump overnight who said China “would like to make a deal, we are not ready to make a deal. And we are taking in tens of billions of dollars of tariffs, and that number could go up very, very substantially, very easily.”
Also ensuring a quiet start to the week, markets in both the UK and the U.S. were closed overnight for public holidays. In terms of what might inspire market movement in coming days outside of geopolitics, the international economic data is typically light at this time of the month with only two data points aligning for a possible USDCAD trade.
U.S. consumer confidence data is due to be released early tomorrow morning Sydney time. The market is looking for a rise from 129.2 to 130 in May. However, due to the escalation in trade tensions and a decline in stock prices during the survey period, the risks appear to be for a softer number which would provide a temporary setback for the U.S. dollar.
On Thursday night, the Bank of Canada (BoC) is widely expected to keep the overnight rate on hold at 1.75%. At its April meeting, the BoC shifted from a tightening bias to a neutral bias. However, since the April meeting, there has been a general improvement in Canadian data and conditions. Examples of which include the creation of 106.5 thousand jobs in April 2019, making it the strongest gain in employment on record. The U.S. has dropped its steel and aluminium tariffs on Canada, and outside of Vancouver, there are signs of stabilisation in house prices. Hence there is the potential of a more hawkish tone in the statement.
To take advantage of a possible drop in U.S. consumer confidence and more hawkish tone from the BoC, traders might like to take the following short-term trade idea. Sell USDCAD on a bounce to 1.3475. The stop loss would be placed above range highs at 1.3530, and the target for the trade would be towards range lows at 1.3360ish.
Source Tradingview. The figures stated are as of the 28th of May 2019. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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