Dramatic Investor Adjustment Continues

Today's North American calendar is light. The two main reports are the US January new home sales and Mexico's December 2019 retail sales. Existing homes sales fell in each of the last three months of 2019 but are expected to have begun the new year with a pop. A 3.5% increase would bring new home sales to a 718k annual rate. The cyclical high was set last June near 729k. Mexican data from last year was rendered moot by Q4 GDP revision yesterday, showing the economy contracted by 0.1% in the quarter for a 0.5% contraction year-over-year.  

Speculation that the Bank of Canada could cut rates as early as next week, coupled with the drop in oil prices and the risk-off move, keeps the Canadian dollar on the defensive. The US dollar continues to straddle the CAD1.3300 area. There is an option for $550 mln at CAD1.3310 that expires today. Initial support is seen near CAD1.3265. The unwinding of carry trades continues to weigh on the Mexican peso. Just like it had been the best performer this year, it has been the worst since the start of the last week, shedding about 3.25%. A move above MXN19.22 finds little resistance until the MXN19.50-MXN19.60 area. The Dollar Index peaked on February 20, near 99.90.  It has found support a big figure lower. Resistance is seen in the 99.30-99.40 area.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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