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The recent retracement in oil prices from fresh 2016 highs has removed tailwinds from the Loonie, as it is the country’s largest export and has an outsized influence on the Canadian current account. Oil prices fell on Friday, as a strong U.S. dollar ignited profit-taking in crude by investors. A stronger dollar makes greenback-denominated oil less attractive to holders of the euro or other currencies.
However, Continuing threats by militants against Nigeria’s oil industry and fear of further security incidents that could hit supplies worldwide, have limited the losses in crude.
In addition, Bank of Canada Governor Stephen Poloz rang the alarm bells on the housing market, in comments on Thursday – especially in Toronto and Vancouver. Concerns are rising over the next move in Canadian monetary policy, and whether the BOC would consider raising rates to cool a localized bubble.
Meanwhile, the dollar pushed higher against other major currencies today after a report showed that jobless claims in the US unexpectedly fell last week. The dollar index stood at 94.185, pulling away from a five-week trough near 93.400.
The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending June 4 decreased by 4,000 to 264,000 from the previous week’s total of 268,000. Analysts had expected jobless claims to rise by 3,000 to 270,000 last week, after Friday’s dismal employment report for May showed the slowest rate of jobs growth since September 2010. The improved data boosted optimism over the strength of US economy, and a near-term rate hike as early as July is now anticipated.
Ahead in the session, Canadian labour market figures will take centre stage, with no major US indicators until the Fed’s policy meeting next week. The Canadian economy is forecast to add 3,100 new jobs after losing 2,100 last month. The unemployment rate is expected to remain unchanged at 7.1%.
Fig. USDCAD D1 Technical Chart
The pair is extending gains to 1.27357, keeping the trade above the 1.2700 mark for the time being. RSI (14) is still hovering as low as 38.20 near the oversold territory, suggesting that the selling power remain very strong. ADX is at 31.68, along with DI- staying above DI+, indicating a bearish market. The pair is anticipated to test the resistance at 1.28965 before falling back .
Buy Digital Call Option from 1.25764 to 1.28965 valid until 20:00 June 10, 2016