Monday January 21st, 2019

CAD is weaker this morning but still stuck in a range. Ongoing potential trade issues with China might be the reason CAD hasn’t rallied further given recent strength in oil. Overall commodity prices are historically undervalued relative to the SP500, but commodities seem to be finding some support. This should bode well for Canada going forward. CAD should find support in this range and further strength into next week.

Due to the Martin Luther King Day in the US today trading will be very light and there are no economic reports. Light trading means there is always a risk of sharp moves when a large order hits thin volume.

The US Dollar index has rallied surprisingly sharply over the last two weeks and continues to show strength primarily due to Euro weakness, but the Euro has huge support around 1.135-1.14. It’s been trading between 1.135 and 1.165 for three months now, while Sterling has shown surprising strength given the lack of British consensus on Brexit. Prime Minister May is expected to table an alternative Brexit proposal to parliament today. A conclusion to Brexit will resolve the Euro trading range. If the Euro breaks 1.135 look for an eventual move to par.