August 12, 2019
USDCAD Open (6:00 am EDT) 1.3235-38 Overnight Range 1.32031.3243
There wasn’t any actionable economic data overnight, so traders looked to the heavens (and headlines) for inspiration. There were plenty and none of it good. China officials are describing Hong Kong protests as showing “signs of terrorism.” Protesters forced the closure of HK airport. Traders fear that mainland China won’t take kindly to the challenge to their rule and will act in their usual ham-fisted way President Trump stoked fears of a prolonged China/US trade war in a tweet, Saturday. He said “China wants to make a deal so badly. Thousands of companies are leaving because of the Tariffs, they must stem the flow. At the same time China may be hoping for a Democrat to win so they could continue the great ripoff of America, & the theft of hundreds of Billions of $’s!”
FX trading was subdued in Asia but turned buys during the European session. A reported “large” corporate order to sell EURGBP knocked EURUSD for a loop in the process. The single currency dropped from 1.1210 to 1.1163 before rebounding to 1.1292 in early New York trading. Analysts see further EURUSD weakness on a break of support at 1.1170 which targets 1.1100.
GBPUSD rallied thanks to the EURGBP sell-off, rising from 1.2017 to 1.2083 in New York trading. Traders are short GBPUSD up the wing-ding and looking for additional weakness to 1.1988. Brexit and recession fears should cap gains.
USDJPY plunged alongside selling of EURJPY in Europe and as US 10 year Treasury yields fell from 1.745% to 1.685%. Prices continue to be undermined by US/China and Japan/South Korea trade tensions.
AUDUSD and NZDUSD are weighed down by dovish central bank outlooks. Kiwi came under additional selling pressure after news that an NZ Treasury document speculated the Overnight Cash Rate (OCR) could be cut to -0.35%.
The mild shift to risk-averse sentiment, which fueled broad US dollar demand overnight, boosted USDCAD from 1.3203 to 1.3249. A dip in WTI oil prices also supported prices. Traders shrugged off Friday’s weaker than expected Canadian employment report. However, some economists believe the details support an easing bias from the Bank of Canada.
The Canadian and US economic calendars are empty suggesting choppy but rangebound FX trading today.
The intraday USDCAD technicals are mildly bearish while prices are below 1.3260, looking for a break of 1.3180 to spark a renewed slide to 1.3110. A break above 1.3260 shifts the foucs to 1.3400. For today, USDCAD support is at 1.3210 and 1.3180. Resistance is at 1.3260 and 1.3310. Today’s Range 1.3170-1.3260
Chart: USDCAD 1 hour
Source: Saxo Bank