USDCAD open: 1.3867, overnight range 1.3862-1.3879, close 1.3875
USDCAD barely budged overnight mainly due to a general lack of interest in FX. On going Middle East tensions, more unhinged rants from Trump and reduced odds for a Fed rate hike were viewed as “just more of the same.” Nothing to see, move along.
It is the last day of the US Canada trade talks before Trump’s 50% tariff kick in. It’s a big deal domestically but barely gets a mention elsewhere. The reality is “what is the point?” There is no such thing as a “binding deal” to Trump. Just ask any of the countries that though they had one.
WTI oil ticked higher in a 83.80-84.84 range due to ongoing US and Iran tensions and Trump’s latest threat to bomb Oman. Oman? Perhaps it was another Biden moment and he meant Iran. Perhaps he was misheard because he was speaking with a mouthful of lettuce from the inside a catering container. Whatever. Trump’s three-week war is nearing the 6 month mark.
Today’s US data includes export prices, housing starts, capacity utilization, industrial production and pending home sales. None of it will interest FX traders.
USDCAD Technicals
The intraday USDCAD technicals are bearish while prices trade below the downtrend line from the August peak, currently around 1.3910, and are looking for a break below 1.3841, where channel support and chart support converge, to extend losses toward the 0.618 Fibonacci retracement at 1.3822. A move above 1.3910 targets 1.3970.
Longer term, USDCAD is trading at the bottom of the descending channel that has guided prices lower since the 1.4250 peak in June. The pair has fallen below the 0.5 Fibonacci retracement of the May-June range at 1.3905 and is testing the 200-day moving average at 1.3852. A decisive break below channel support at 1.3840 would shift the focus to the 0.618 Fibonacci retracement at 1.3822, and a move below that level opens the door to 1.3704, the 0.786 retracement.
However, the combination of channel support and a deeply oversold daily RSI warns that the immediate downside may be limited and leaves room for a corrective bounce toward the 1.3950-1.4010 area, the latter marking the channel top.
For today, USDCAD support is at 1.3840 and 1.3820. Resistance is at 1.3910 and 1.3950.
Today’s expected range is 1.3840-1.3910.
FX Heat Map
FX open high low 6:00 am
Risk Aversion Rises
The heat is on across the Northern Hemisphere and Europe, and markets are feeling it as well. The US dollar started today’s session mixed to flat as downgraded risks for a Fed rate hike next month were offset by rising Middle East tensions. Those tensions were exacerbated by Trump. Fresh from reading a slew of polls that showed his approval rating at 33%, the lowest of any president since Nixon, he threatened to “bomb the shit “out of Oman.
The Strait of Hormuz remains effectively closed even as Trump claims it is controlled by the US.
Taking Stock
Asian markets closed flat except for Japan’s Topix which lost 1.05%. The Hong Kong Hang Seng and Australia ASX 200 were flat.
As of 6:50 am, European bourses are in the red except for the UK FTSE 100 which flat. The German DAX is down 0.30% and the French CAC-40 is down 0.42%. S&P 500 futures have lost 0.50%, the US 10-year yield has climbed to 4.742%, the DXY is 99.64, and gold is $4,397.07.
EURUSD | Range 1.1567-1.1586
EURUSD drifted aimlessly despite downgraded Fed rate hike concerns and better than expected ZEW Survey results. Economic Sentiment rose 7.9 points to 34.2 points. The current situation gained 16.5 points to -61.1 points. The short term EURUSD technicals are bullish above 1.1520 and looking for a break above 1.1620 to extend gains to 1.1690.
GBPUSD | Range 1.3520-1.3554
GBPUSD trickled lower throughout the overnight session following a weaker than expected employment report. Employment growth slowed to 83K from 147K, the claimant count fell by 11K, but unemployment remained at 4.9% rather than easing to 4.8%. The cooling labour market argues that the Bank of England has no need to raise rates further. The GBPUSD technicals are bullish above 1.3470 and looking for a sustained move above 1.3610.
USDJPY | Range 159.30-159.78
USDJPY remains bid as the risk of higher oil prices due to supply constraints in the Middle East overshadows talk that the BoJ will hike rates in September. Prices are also supported by rising US Treasury yields. FX intervention fears have managed to contain gains below 160.00.
AUDUSD | Range 0.7095-0.7115
AUDUSD traded uneventfully in a quiet range as the overall US dollar trading against the majors was also subdued. It is trading near the top of its overnight range. Westpac Bank’s consumer confidence index improved, rising to 6.0% from 4.1% in July.
USDMXN | Range 17.0283-17.0723
USDMXN continues to be weighed down by the wide Mexican and US interest rate spread. Bearish sentiment improved with the downgraded odds for a Fed rate hike while Banxico has halted its easing program.
CHINA
- PBoC Fix: 6.7905 vs exp. 6.7452 (prev. 6.7873).
- Shanghai Shenzhen CSI 300 fell 0.32% to 4,725.81
Yesterday, Premier Li Qiang said that the government is planning to introduce “pragmatic and effective incremental policies” to address the prominent issue of insufficient domestic demand and to boost the domestic economic cycle.
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
