Canadian Dollar Rebounds, Ukraine Fears Cooling

If USD/CAD can't break 1.10 on a dreadful Canadian jobs report, how will it make gains? The Canadian dollar was the top performer on Monday while the euro lagged. Volatility could pick up in Asian trading with the Japanese PPI, Australian business confidence and Australian home prices.

Mundane Mondays have been the trend in the past month and that was no different this time. The good news is that the other four days of the trading week have seen better moves.

The long trend in New York trading was a slide in USD/CAD down to 1.0920 as the pair virtually eliminated the 70 pip rally on Friday's weak Canadian jobs report. The decline flashes a double top in the pair ahead of 1.10 and with some indicators flashing oversold, the bulls have reason to be nervous.

The main story remains the battle in Ukraine and most signs continue to point to government forces slowly gaining control. Russia had pushed for a humanitarian mission and that appears to be headed to fruition but it will be led by the Red Cross and include participation from the US and EU along with Russia. Yet NATO's leader Rasmussen again warned on Monday of a high probability of Russian troops invading Ukraine. That left traders wonder what he knows and they don't.

Overall risk trades did a bit better on the day with the S&P 500 up 5 points and USD/JPY edging to 102.20. Most are circling Wednesday on the calendar because of a large slate of tier 1 data, including Japanese GDP, the UK claimant count, the BOE inflation statement, German/French CPI, speeches from Dudley/Rosengren and US retail sales.

But first the market is watching several Asia-Pacific releases. The first comes at 2350 GMT when July Japanese PPI numbers are expected to rise 4.4% y/y as the soft yen weighs.

The focus shifts to Australia at 0130 GMT with July NAB business confidence (prior +8) and the Q2 Australian home price index. It's a reminder of the unstoppable house price acceleration with the market looking for a 9.3% y/y rise.