Currency
USDCAD Overnight Range 1.2389-1.2508
Yesterday’s USDCAD slide halted in Asia and by the time the smoke cleared, USDCAD was back above 1.2500, albeit only briefly as EURUSD buyers have been relentless. Overnight, the OECD announced a downgrade to their global growth forecasts. They cut Canada’s growth outlook (the second time this year) to 1.5% (previous 2.2%) while bumping up 2016 growth to 2.3% from 2.1%., citing the damaging effect on the domestic economy from low oil prices. However, the reality is that USDCAD merely followed US dollar moves and ignored the OECD report.
It has been an active start to the New York session. The prospect of a Greece deal continues to lift EURUSD, which is currently at 1.1210, as traders ignore headlines that the German Finance Minister says “optimism on Greek negotiation progress is not justified”. Traders also ignored better than expected US trade data and an ADP print of 201K (Forecast 200k). The ECB left rates unchanged and Mr. Draghi’s press conference didn’t deliver any surprises.
In Asia, AUDUSD jumped on a strong GDP print but the gains weren’t sustained. In Europe yesterday’s dollar sellers became dollar buyers allowing the US dollar to rally across the board ahead of the ECB meeting while traders complained of poor liquidity ahead of the ECB meeting. GBPUSD was hit harder on a poor PMI showing.
USDCAD technical outlook
The intraday USDCAD technicals are bearish following today’s failure to extend gains above 1.2510 and its subsequent retreat below 1.2460 pointing to further losses back to 1.2370. For the balance of the week, the existing 1.2370-1.2520 range will likely remain intact until Friday’s payrolls reports from the US and Canada.
Today’s Range 1.2380-1.2480
Chart: USDCAD 4 hour Fibonacci target Larger Chart
With Q1 earnings largely in the books (over 97% of S&P 500 firms have reported), today’s chart provides some long-term perspective on the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today’s chart illustrates the dramatic nature of the earnings plunge during the financial crisis as well as the recovery that followed — a recovery that took earnings from levels not seen since the Great Depression to a new record high. More recently, however, S&P 500 inflation-adjusted earnings have begun to pull back and are now 6% off of their record highs — a significant concern going forward.
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Today I’m sending you a complimentary report from one of the most original and deep-thinking analysts I’ve come across in years—Mr. Jawad Mian.
Jawad is the editor of Stray Reflections, a unique, actionable—and I would add, brilliant—global macro advisory letter. I’m proud to say Jawad is also the newest member of the Mauldin Economics team.
I’m giving you complimentary access to 2 months of his work because I want you to judge Jawad’s research for yourself and if time allows, send us a note with your impressions.
You can read April’s Stray Reflections in PDF by clicking here. I’ll also send you the May issue later this week. In fairness to Jawad’s paying subscribers, we’ve removed the 50+ position long/short portfolio from this preview.
To celebrate Jawad bringing Stray Reflections to Mauldin Economics, he and I have coauthored a Thoughts from the Frontline. If you haven’t read it yet, you can do so here. I study the global markets through the lens of a long-term trend seeker, while Jawad, a trade maker, must search for actionable ideas for investors. While our roles are different, our viewpoints are complementary. As expected, it was a lively and insightful exchange.
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Please take a few moments to read the attached report from Jawad with my compliments, and be on the lookout for another later this week. Again, you can click here to read the April issue of Stray Reflections.
John Mauldin
Chairman
USDCAD Overnight Range 1.2436-1.2533
The US dollar is down across the board continuing the trend which began overnight following a tsunami of headlines pertaining to the Greece and EU debt renegotiations. The USD gave back all of yesterday’s post US ISM gains and then some. The headlines have been coming fast and furious and due to the lack of any meaningful US data have been given an exaggerated level of importance. Nevertheless, EURUSD has soared to as high as 1.1190 from 1.0950 in New York trading.
The Reserve Bank of Australia (RBA) got the ball rolling with what has been described as a “less-than doveish” statement when a reference to an easing bias was omitted. AUDUSD jumped to 0.7702 from 0.7625. In Japan, early demand for USDDJPY which pushed it above 125.00 didn’t last and the currency pair retreated.
The European session was rife with rumours about a pending/last minute Greece debt deal which came to a head with the most recent headlines. Those rumours underpinned EURUSD as did better than expected German employment data. UK data was also positive and GBPUSD gained ground.
USDCAD has plunged in concert with the broad US dollar weakness, dropping from 1.2530 to take out support at 1.2490. It has tested the second level of support at 1.2440 which has held. The Greek tale is only part of the story this week. Friday’s US nonfarm payrolls could kick off another bout of dollar buying on an upside surprise.
USDCAD technical outlook
The intraday USDCAD technicals are bearish following the break of support at 1.2490. A break below 1.2440 would suggest a short term top is in place at 1.2560 which would be confirmed by the loss of 1.2410. A move below 1.2410 would target 1.2320. Failure to break 1.2440 suggests additional 1.2440-1.2560 consolidation until Friday.
Today’s Range 1.2430-1.2490
Chart: USDCAD 4 hour Fibonacci target
Capital is limited in the current mining exploration environment, so investors are increasingly looking for companies that have lower costs of doing business. Over the last four years, we’ve seen large-scale, low-grade projects go out of favour and investor preferences resting with low-CAPEX, high-return projects.
However, it is not only the construction costs and scale of a mine with which companies can save money. It can also be in initial prospecting, exploration, and the development of a project. The key here is for a company to be doing this work in a location setting that is easy to work in from logistical and cost perspectives. If a project is in a remote area in mountainous wilderness that requires setup of a camp and bush planes in and out, the payoff has to be that much higher.
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Once a deposit is discovered, advanced exploration and development can also be at a discount. Drilling wells and testing recovery are more like shallow oil wells or drilling for water. Finally, permitting for construction and production is faster because of the placer classification.
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