Intraday Market Thoughts

Who Said no Free Lunch?

by Ashraf Laidi
Oct 23, 2013 17:06

Who said there is no "Free Lunch in the markets? Today's Bank of Canada announcement in downgrading its GDP outlook for 2013, 2014 and 2015 as well as dropping hints for higher rates, led to broad losses in the loonie, lifting USDCAD near 1.0400 from 1.0320.  The Bank of Canada's downgrade must not have come as a surprise to those who heeded this month's comments from BoC governor Stephen Poloz  and BoC Senior Deputy Tiff Macklem, both of whom had some negative comments regarding Canada's GDP growth and the prospects for weaker inflation. Those comments were made well before the US shutdown /debt ceiling had erupted later in the month, causing red flags for Canadian exports. Today's BoC decision was merely an official materializsation of an already known fact, but not yet reflected in the market. Technicals also called the rally in USDCAD as was alerted 40 mins before today's decision in our Premium service, shedding light on the 13-month trendline support “aiming to retest 1.0360s—the confluence of the 55 and 100-DMAs”.

2 longs in USDCAD were issued in today's Premium Insights, while the ongoing CADJPY short neared our final target as rising Chinese market rates dragged down JPY crosses. Falling AUDUSD despite higher CPI trimmed the existing profits (entry at 0.9520s), while a new long was added. Both USDJPY shorts and the existing CADJPY trade are in progress.
Act Exp Prev GMT
RBA trimmed mean CPI (Q3) (q/q)
0.7% 0.6% 0.6% Oct 23 0:30
Consumer Price Index (Q3) (y/y)
2.2% 1.8% 2.4% Oct 23 0:30
RBA trimmed mean CPI (Q3) (y/y)
2.3% 2.1% 2.3% Oct 23 0:30
Consumer Price Index (Q3) (q/q)
1.2% 0.8% 0.4% Oct 23 0:30

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