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On December 2nd, Intel announced an additional investment of RM860 million (US$208 million) to make Malaysia its assembly and testing operations hub, a move Malaysian Prime Minister Anwar Ibrahim stated would boost the Southeast Asian nations key role in the global semiconductor supply chain. He added that Intels decision was based on confidence in Malaysias long-term plans. Anwar stated that Intel already has operations in Malaysia, including a RM12 billion advanced packaging plant in Penang, which is 99% complete. In 2021, the US company pledged a US$7 billion investment to establish a manufacturing base in Penang. Malaysia accounts for approximately 13% of the global chip packaging, assembly, and testing (the final step in semiconductor manufacturing) market, an industry that drives 40% of Malaysias export output. As major governments race to strengthen their semiconductor capabilities, Malaysia has been striving to elevate its position in the global supply chain.Futures News, December 2nd: As of December 1st, the mainstream benzene market price in East China closed at 5320 yuan/ton, down 110 yuan/ton from 5430 yuan/ton at the beginning of November. From a fundamental perspective, December arrivals in East China are concentrated, and major ports in East China will enter a period of continuous inventory accumulation. In addition, with the weather turning colder, insufficient end-user orders and low downstream operating enthusiasm continue to put pressure on price recovery across the industry chain. However, on the cost side, geopolitical tensions threaten market supply, and European and American crude oil futures rose 1.3%. Under the interplay of bullish and bearish factors, the benzene market is expected to trade within a range.On December 2nd, futures market news reported that crude oil prices traded higher yesterday, primarily driven by the return of two major geopolitical risk premiums. Firstly, the slow progress of peace talks between Russia and Ukraine, coupled with Ukraines attacks on European oil ports and pipelines; secondly, the USs air traffic control over a South American country over the weekend, leading to the breakdown of peace talks and heightened tensions in South America. Zhuochuang Information predicts that the return of geopolitical risks has led to an increase in oil prices. However, whether this upward trend can continue depends on close monitoring of developments. If the conflict escalates, oil prices will continue to rise; otherwise, if the situation remains manageable, oil prices will likely experience wider fluctuations. In the short term, the geopolitical risk premium remains high, and oil prices are expected to remain relatively strong.Fitch: Penalties imposed on South Korean banks highlight non-financial risks.On December 2nd, Xiaomi Auto announced that as of today, since April 3rd, 2024, Xiaomi Auto has delivered more than 500,000 vehicles.

Canadian Dollar Forecast: Geopolitics and Bank of Canada to Establish the Tone for USD/CAD

Larissa Barlow

Apr 24, 2022 10:34

USD/CAD has been on a roller coaster ride in recent days amid heightened geopolitical tensions in Eastern Europe after Russia initiated a military operation and began an unjustified invasion of Ukraine. Before dropping to 1.2735 on Friday, the pair briefly rose to a two-month high of 1.2877 on Thursday.

 

Although oil prices have surged this year, with the West Texas Intermediate blend up 5 percent in February and up over 22 percent in 2022, the Canadian dollar (loonie) has been unable to take advantage of the situation, as high volatility and risk-averse sentiment have limited the appeal of high-beta currencies while boosting demand for safe-haven assets.

 

The tension between Russia and Ukraine could, however, diminish in the coming days, changing the scenario. We can't predict how this situation will play out, but Moscow's willingness to resume negotiations with Ukraine's leadership on Friday was an indication that diplomacy still has a chance. The Canadian dollar is well-positioned to gain strength in the near term if hostilities cease, thanks in part to better terms of trade as a result of rising commodity prices.

 

At the same time, Bank of Canada could drive USD/CAD’s reversal lower in the days ahead if it delivers a hawkish interest rate hike on Wednesday when its March monetary policy meeting concludes. That so, the bank is anticipated to boost borrowing costs by 25 basis points to 0.50 percent to confront red-hot inflation, which touched a three-decade high of 5.1 percent y/y in January, more than twice above the 2 percent mid-point target. Because the change has already been discounted to zero, traders should concentrate on the statement's phrasing and forward direction.

 

With overall economic slack absorbed in Canada, solid employment growth and growing price pressures, BoC could signal that the tightening cycle will be forceful, paving the scene for numerous hikes in the coming quarters. Investors currently expect four hikes in interest rates in 2022, but if policymakers take a harsher posture amid rising inflation threats, the normalization path might reprice higher. The CAD is likely to rise in response to this scenario.

USD/CAD Technical Analysis

If USD/CAD continues its downward trend and breaks below support near the psychological level of 1.2700, sellers may be emboldened to drive the exchange currency towards 1.2600, the 38.2% Fibonacci retracement of last year's June/December rise.

 

On the flip side, if bulls return and regain control of the market, resistance resides at 1.2878, Thursday’s swing high. If prices go higher and overtake this barrier, bullish impetus might grow, opening the way for a retest of 2021’s high.

USD/CAD Technical Chart

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