Global macro overview for 07/07/2017

Global macro overview for 07/07/2017:

The Canadian Trade Balance data did not disappoint global investors. The Canadian trade account recorded a deficit of $1.09bn for May following a revised $0.55bn shortfall for April which was originally reported as $0.37bn. Global investors expected a slightly weaker deficit data, around $0.50bn for the reported month. On the positive note, total exports from Canada are at new highs as they increased 1.3% for the reported month to a fresh record high of $48.7bn. The biggest exports were reported from metal and non-metallic products and motor vehicles. On the other hand, imports rose 2.4% on the month to a new record high and the biggest contribution to imports was noted in motor vehicles and spare parts and aircraft. It was the sixth month in a row of increasing imports.

The Bank of Canada was rather optimistic at its last meeting in June and even started to consider whether all of the substantial monetary stimuli in the economy is still justified. However, the policymakers express their concerns regarding the Canadian trade balance, especially exports. After the recent data, BoC should feel more confident surrounding trade developments as the rise in trading volumes should not discourage BoC policymakers from tightening monetary policy. The regulator has been holding rates at a record low of 0.50% since 2015 when it was forced to lower rates due to the sharp oil price fall. Currently, the Canadian economy is showing a steady economic growth which is why a rate hike by the end of this year remains on the table.

Let's now take a look at the USD/CAD technical picture on the H4 time frame. The market keeps trading in a tight horizontal zone between the levels of 1.2911 - 1.3015, but the bounce from the oversold market conditions is indicating a possible breakout higher towards the next important resistance at the level of 1.3165. Any better than expected data from the US will support this scenario.