July 9, 2019
USDCAD Open (6:00 am EDT) 1.3129-32 Overnight Range 1.3093-1.313
The US dollar traded higher yesterday and continued the theme overnight. The greenback opened in New York with gains across the board against the G-10 major currencies. Friday’s better than expected nonfarm payrolls data forced traders re-evaluated their expectations for US interest rates. They concluded that Fed Chair Jerome Powell might suggest that if rates are cut at the end of the month, it will be a case of “one and done.”
GBPUSD was the biggest loser, dropping from 1.2521 to 1.2458. Fears that a Boris Johnson led government would prorogue parliament to force a “no deal” Brexit at the end of October fueled the selling. President Trump’s tweet in response to the UK Ambassador’s comments about the Trump administration didn’t help.
He tweeted. “I have been very critical about the way the UK and Prime Minister Theresa May handled Brexit. What a mess she and her representatives have created. I told her how it should be done, but she decided to go another way. I do not know the Ambassador, but he is not liked or well…. .thought of within the US. We will no longer deal with him. The good news for the wonderful United Kingdom is that they will soon have a new Prime Minister. While I thoroughly enjoyed the magnificent State Visit last month, it was the Queen who I was most impressed with!”
President Trump continued to remind trading partners that US trade agreements aren’t worth that much. They slapped new tariffs on Mexico and China, aimed at importers of Fabricated Structural Steel. The renewed trade tensions knocked the Australian, New Zealand, and Canadian dollars lower.
EURUSD trade in a narrow 1.1194-1.1218 range. There wasn’t any Eurozone data of note.
USDJPY is underpinned by yesterday’s steep rally in US Treasury yields which climbed from 1.941% to 2.067% in early New York trading. The re-assessment of the Fed rate cut outlook boosted yields.
Oil prices ticked higher in early New York trading, with WTI rising from an opening level of $57.83 to $58.13. Prices are supported by supply disruption concerns if Iran acts on its threat to retaliate against the UK for seizing one of its tankers, the latest round of US tariffs on Mexico and China and shrinking US inventories.
USDCAD rallied alongside the commodity currency bloc, broad US dollar strength and a minor short USDCAD squeeze. However, the topside should be capped by firming oil prices and by the belief that Wednesday’s Bank of Canada monetary policy statement may be less dovish than expected.
Today’s US data is second tier which should be a non-factor for FX markets. The Fed speakers on the rubber chicken circuit include Bullard, Quarles, and Bostic.
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish while prices are below 1.3120, looking for a break USDCAD tested downtrend line resistance in the 1.3120-30 level this morning and it held. However, prices need to get below 1.3090 to shift the focus back to 1.3050. A break above 1.3130 targets1.3180 and then 1.3230.
Today’s Range 1.3080-1.3150
Chart: USDCAD 4 hour