January 14, 2020
USDCAD open 1.3070-74 ( 6:00 am EST) Overnight Range 1.3052-76
US inflation forecasters were right on the money. They predicted that headline and Core CPI would rise 2.3% y/y in December and that is what happened. Headline CPI was 0.2% higher than the November results.
The US dollar opened in New York on with small gains and inched higher after the inflation data.
FX Market Snapshot Change in currency value against the US dollar NY close to NY open (6:00 am EST)
Source: Saxo Bank/IFXA
The “China Syndrome” was playing overnight. Asia markets were frothy at the start of the session, opening with a risk-on bias. That euphoria started to fade before Europe opened and continued to do so when the New York session started.
Asia reacted positively to US Treasury Secretary Steven Mnuchin’s official confirmation that China was no longer on the US Currency Manipulator List. The news drove USDCNY lower and lifted the US dollar against the G-10 majors. That begs the question: “Who is manipulating who’s currency? Risk sentiment was also bolstered by “sources” leaking details of the Phase 1 trade agreement. China reportedly agreed to purchase $200 million of US goods over the next two years Source: Saxo Bank/IFXA
EURUSD traded indifferently and opened at the bottom of its overnight 1.1129-43. Wide Eurozone/US interest differentials which favour the Americans, are acting as a drag to further topside gains. Once again, chunky option expiries in the 1.1130-60 area today, are also hampering trade. There wasn’t any Eurozone data of note. The Eurozone technicals are bullish while prices are above 1.1080, which is where the uptrend line from October comes into play.
GBPUSD continues to consolidate losses after cracking below support in the 1.3000-10 area yesterday. A series of dovish comments from Bank of England officials, including Governor Mark Carney, raised the risk of an interest rate cut on January 30. There were not any UK economic reports released. GBPUSD hit 1.2956 in Asia and tested 1.3000 in early New York trading. The intraday technicals are bearish below 1.3030.
Japanese traders returned from a long weekend and promptly bought USDJPY. The soon-to-be signed US/China Phase 1 trade agreement and some of the alleged details, combined with Uncle Sam removing China from their currency manipulator list, gave a positive spin to risk sentiment. The break of 110.00 triggered some stop-loss buying of USDJPY, but the rally stalled at 110.20 when US Treasury yields started to slide. The intraday technicals are bullish while prices are above 1.0985.
AUDUSD and NZDUSD jump on then off the risk bandwagon in overnight price action. Both currency pairs dropped at the Asia open, weighed down by falling gold and oil prices. They attempted to rally after the better than expected China trade data was released but could not muster any momentum and prices dropped into the New York open. AUDUSD needs to break above 0.69120 to suggest further gains.
USDCAD drifted higher on the back of falling oil prices and broad US dollar demand. WTI dropped 2.4% since yesterdays peak and Asia’s low, as the Iran/US crisis fades. Traders also ignored the modestly positive Business Outlook Survey, released yesterday. It suggests Business sentiment ticked higher in Q4, supported by an easing of trade tensions. Oil prices bounced from their overnight low of $57.76 to $58.38 in early New York trading. However, USDCAD mostly ignored the move.
The intraday USDCAD technicals are bullish while prices are above 1.3030, with the move above 1.3060 breaking the downtrend line from December 3. A decisive break above 1.3105 targets 1.3190. For today, USDCAD support is at 1.3050 and 1.3030. Resistance is at 1.3105 and 1.3130 Today’s Range 1.3140-1.3110
Chart USDCAD 4 hour
Source: Saxo Bank
