USDCAD Overnight Range 1.3965-1.4085

The BoJ surprised traders and introduced a negative interest rate policy overnight.  USDJPY soared to 121.30 from 118.40. Fans of Mortal Kombat are well aware of Sub-Zero’s ability to control ice. The Bank of Japan governor, Haruhiko Kuroda is hoping his new sub zero interest policy will help warm a chilled economy.

That BoJ move roiled FX markets on cross JPY selling. Asian equity markets rallied and they all closed the day with gains.  European markets are also in the green as are US stock futures.

This mornings US data helped diffuse the odor from yesterday’s weak Durable Goods report.  US GDP 4Q GDP came in at 0.7%, slightly less than the consensus but went a long way in suggesting that the US economy wasn’t skidding out of control.  The US dollar rallied against the G-10 currencies except for CAD, AUD and NZD.

In oil land, the euphoria from yesterday’s sketchy reports that Russian and Saudi Arabia were planning on working with Opec to reduce global oil production faded in Europe. However, the decline from yesterday’s $34.79/b peak was shallow.  Anticipation of further positive news over the weekend combined with the strong US dollar, post data, has pushed WTI back to $33.80 after trading in a $33.08-$34.13 range overnight.

The Loonie has followed WTI prices higher. USDCAD dropped to 1.3965 in Asia, following the BoJ announcement due to CADJPY buying and then reversed itself in Europe, climbing back to 1.4085. Another rally in WTI prices and a positive Canadian GDP report has driven USDCAD back to 1.3975 as of 6:45 am PST.

USDCAD technical outlook

The intraday USDCAD technicals are bearish while trading below 1.4050 looking for a break of the 1.3920-50 support area to extend losses to 1.3800. Failure to break support points to additional choppy trading with the 1.3950-1.4100 trading band.  Longer term, the uptrend line from the October low remains intact while trading above 1.3800

Forecast Range for the day 1.3940-1.4040

Chart USDCAD 4 hours