Todays Largest Percentage Movers: 

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USDCAD

Sustaining 28-Year Lows

A strong move in the USDCAD was not unexpected for Monday as the mixture of thin summer liquidity, a impending central bank rate decision and an exchange rate that is at a 28-year low intensified speculatory pressures.  Spot action in the now infamous USDCAD has revealed the strain behind the unsustainable level of the cross rate.  Now working on the third month of range-bound activity, fundamentalists are not willing to give up on pushing the loonie higher as the Canadian economy sizzles; but a solid foundation of improvement needs to be found before another wave of bidding can be supplied.  If the BoC proves neutral in the conclusion of tomorrows monetary policy meeting, the sustainability of the extreme exchange will be brought into question as interest in the countrys debt assets wanes in favor of rates that are currently higher (like the USs) and those that are expected to begin or continue moving at a more aggressive pace (like the BoJ and ECB).

Technically Speaking

The USDCAD once again tested the upper band of its two-and-a-half-month trading range, finishing just below its two-week high of 1.1262. With a stiff ceiling at the six-times tested 38.2 fibo of its 1.1770-1.0970 decline immediately above, the path of least resistance for the pair is to the downside. Any retracements lower could slow at the previous intraday barrier of 1.1150, and would probably meet rigid support at the psychologically significant 1.1100 level. If the USDCAD manages to break through the seemingly impenetrable 1.1260-1.1280 zone, the next resistance would come at the confluence of the 100-day SMA and a round number at 1.1300.

AUDCAD

Jitters Before BoC Decision

Volatility in the AUDCAD picked up on Mondays session as speculation over whether the Bank of Canada would raise rates or not reached a fever pitch.  Scheduled for announcement for Tuesday at 13:00 GMT, both the markets hawks and doves have made their claims well known.  Those supporting the belief that a rate hike is at hand point to the surge in core consumer prices in May to the top of the central banks tolerance band at 2.0%, while the headline figure advanced to a 2.8% pace. Coming right on the heels of the inflation report, retail sales for April pegged support for consumer spending after the measure jumped 1.9% when excluding the usually supportive auto shipments.  On the other side of the coin, doves have fallen back on the tepid results of nearly every other economic release out of Canada, and more importantly on commentary from the banks governor, David Dodge.  After the BoC decided to hike rates a quarter point in May, Dodge followed up with comments that suggested he would pass on a move in July to better assess the economic situation and would more likely continue with the string of now seven-hikes in September.  Further putting off a hike, Dodge came on the wire after the extraordinary jump in core inflation and retail sales saying their predications of price and economic growth remains reasonable.

Technically Speaking

After briefly challenging the 50.0 fibo of its 0.7790-0.7270 downturn at 0.7530, the AUDUSD broke lower to remain even with Fridays open. Last weeks rally pushed it above its 50-day SMA, but todays move places it at a previous congestion zone near 0.7470. The Aussie is now seemingly between a rock and a hard place, with significant resistance from the aforementioned 0.7530 barrier, but equally stiff support at the confluence of its 10 and 200-day simple moving averages at 0.7430. If it manages to recoup todays losses and break through Fridays high of 0.7528, it would likely have difficulty passing the 61.8 fibo of the same 0.7790-0.7270 move at 0.7590. Otherwise, any further declines through its 200-day SMA would likely slow near the psychologically significant 0.7400 number.

AUDUSD

Rebound In Commodities Questionable

Known for its high correlation to commodities, like crude oil and gold, the AUDUSD responded to the continued sell off in some key necessary goods with a marked decline. Perhaps the most highly publicized, and therefore tracked, decline was in crude oil which continued to drop off of its $75.14 intra-day high a few days ago to Mondays close around $73.61.  Many analysts have said the retracement was inevitable as the initial run up was unjustified given the current bulging levels of supply.  It is believed that many of the rallies that have brought, and kept, crude at record highs were instigated on the back of speculation rather than risk hedging or natural supply and demand pressures.  Another commodity that is near and dear to the AUDUSD, gold, backed off 1.4% as geopolitical tensions with North Korea and Iran abated.  This contraction in the precious metal calls into question the sustainability of the nearly 16% rebound from June lows and whether Australian mining companies will be able to fill their coffers to continue to improve efficiency while keeping the millions of Aussies on the payrolls.

Technically Speaking

With large moves both in the AUDUSD and USDCAD, it is of little surprise that the AUDCAD posted a similar move on the day. After stalling at the 50.0 fibo of its 0.8600-0.8140 move on Fridays close, the pair broke through to test the 61.8 level of the same wave at 0.8425. Now having retraced slightly, it rests below the psychologically significant 0.8400 barrier. Any moves lower would have to contend with its two-week uptrend line at approximately 0.8350 and a site of previous congestion at 0.8300. If the AUDCAD holds and pushes through 0.8425, however, it may look to test its 50-day SMA at 0.8500.