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Mid-Day Report

Canadian Dollar Surges on Upbeat BoC Statement, China Xi Urges Peaceful Handling of North Korea

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Canadian Dollar surges sharply on upbeat Bank of Canada statement. BoC left overnight rate target unchanged at 0.50% as widely expected. The central bank noted in the accompany statement that "recent data indicate that economic growth has been faster than was expected in the January MPR". Growth for 2017 through 2019 is expected to "remain above potential". Real GDP growth is projected to 2.5% in 2017, revised up from January projection of 2.1%. Inflation, however, is expected to dip in the months ahead but return to 2% target as the "output gap closes". And BoC concluded by noting that it "acknowledges the strength of recent data, some of which is temporary, and is mindful of the significant uncertainties weighing on the outlook."

China Xi urged Trump to deal with North Korea through peaceful means

It's reported that Chinese President Xi Jinping called US President Donald Trump just four days after the face-to-face summit in Florida. The People's Daily in China noted that Xi advocates resolving the problem in Korean peninsula through "peaceful means". And Xi expressed his willingness to "maintain communication and coordination with the US" on the issue. Xi also stressed that "China insists on realizing the goal of denuclearization of the peninsula." Separately, Chinese Foreign Ministry spokesperson Lu Kang said in a regular news conference that "It is irresponsible and even dangerous to take any actions that may escalate the tension" in Korean Peninsula. And, "all relevant parties should exercise restraint and keep calm, ease the tension instead of provoking each other and adding fuel to the fire."

Russian President Putin said relationship with US worsened under Trump administration

In Russia, President Vladimir Putin complained in a TV interview that level of trust with US has dropped after Trump became President of US. Putin said that "the working level of confidence in Russian-American relations, especially at the military level, under the administration of Donald Trump has not improved, but rather worsened." Putin, who backs Syrian President Bashar al-Assad, said earlier that the chemical weapon attack last week were "provocations" and for accusing the Syrian government. And Putin insisted there should be proper investigation by UN. He also criticized US's missile strike on Syrian air base as "a clear violation of international law". Russian Deputy Foreign Minister Sergei Ryabkov also said today that they have "absolute reliable information" that the chemical attack was done by terrorists.

UK PACAC concerned of foreign intervention in Brexit referendum

In UK, a report by a committee of lawmakers noted that a voter registration website could be attacked by foreign hackers during last year's Brexit referendum. The report was published by the parliament's Public Administration Constitutional Affairs Committee (PACAC). It said the committee did not rule out the possible cause of Distributed Denial of Service attack on the website that cause it to crash before deadline of the vote. And the report noted that "PACAC is deeply concerned about these allegations about foreign interference."

Also, it noted that "the US and UK understanding of 'cyber' is predominantly technical and computer-network based. For example, Russia and China use a cognitive approach based on understanding of mass psychology and of how to exploit individuals." And, "the implications of this different understanding of cyber-attack, as purely technical or as reaching beyond the digital to influence public opinion, for the interference in elections and referendums are clear."

Far-left Melenchon catching up in French presidential race

In France, far-right Marine Le Pen and centrist Emmanuel Macron continued to lead the race for presidential election. However, recent surge in support for far-left Jean-Luc Melenchon into top four trigger some rethink in the possible run-off scenarios. And some investors could be weighing the chance of Melenchon slipping into the run-off in May. A Pollsters Elabe poll showed that both Le Pen and Macron got 23% support, with conservative Francois Fillon at 19% and Melenchon at 17%.

Meanwhile, Elabe also tested a few additional scenarios for the run-off. The result showed that Macron would beat Le Pen, Fillon or Melenchon. Melenchon would beat Le Pen or Fillon but lose to Macron. Fillon would beat Le Pen but lose to the other two.

On the data front...

US import price dropped -0.5% mom in March. UK jobless claims rose 25.5k in March. Unemployment rate was unchanged at 4.7% in February while average weekly earnings rose 2.3% 3moy. Japan machine orders rose 1.5% mom in February. Domestic CGPI rose 1.4% yoy in March. China CPI rose 0.9% yoy in March, PPI rose 7.6% yoy. Australia Westpac consumer confidence dropped -0.7% in April.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3305; (P) 1.3331; (R1) 1.3353; More....

USD/CAD's fall accelerates in early US session and reaches as low as 1.3270 so far. Intraday bias remains on the downside for 1.3263 support. Break there will confirm resumption of whole decline from 1.3534 and target 1.3184 cluster level. (61.8% retracement of 1.2968 to 1.3534 at 1.3184, 100% projection of 1.3534 to 1.3263 from 1.3455 at 1.3814 too). As such decline is seen as a correction, we'd expect strong support from 1.3184 to contain downside and bring rebound. On the upside, above 1.3356 minor resistance will turn intraday bias neutral first. But for now, deeper decline is expected as long as 1.3455 resistance holds.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg from 1.2460 is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. However, break of 1.2968 will argue that the third leg has already started and should at least bring a retest of 1.2460 low. Meanwhile, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

USD/CAD 4 Hours Chart

USD/CAD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Machine Orders M/M Feb 1.50% 3.70% -3.20%
23:50 JPY Domestic CGPI Y/Y Mar 1.40% 1.40% 1.00% 1.10%
00:30 AUD Westpac Consumer Confidence Apr -0.70% 0.10%
01:30 CNY CPI Y/Y Mar 0.90% 1.00% 0.80%
01:30 CNY PPI Y/Y Mar 7.60% 7.50% 7.80%
08:30 GBP Jobless Claims Change Mar 25.5k -10.2K -11.3k
08:30 GBP Claimant Count Rate Mar 2.20% 2.10%
08:30 GBP ILO Unemployment Rate (3M) Feb 4.70% 4.70% 4.70%
08:30 GBP Average Weekly Earnings 3M/Y Feb 2.30% 2.20% 2.20% 2.30%
12:30 USD Import Price Index M/M Mar -0.20% -0.30% 0.20% 0.40%
14:00 CAD BoC Rate Decision 0.50% 0.50% 0.50%
14:30 USD Crude Oil Inventories -2.2M -0.7M 1.M
18:00 USD Monthly Budget Statement Mar -150.0B -192.0B