Canada July GDP was flat. The o.o% reading was below the 0.1% forecast but not a total surprise as most economists were looking for a slowdown in strong growth in the first half of the year. Still, it was enough to give USDCAD a bit of a lift. The currency pair rose from 1.2415 to 1.2474. However, expectations of USDCAD selling due to 1600 GMT month end/quarter portfolio rebalancing flows has put a short-term cap on prices.
US Personal Consumption and Expenditure data was pretty much as expected. US Treasury yields dipped and the US dollar dropped against the majors. Month-end is also a factor in the dollar sales.
Asia FX markets were not very exciting. The US dollar stayed in narrow ranges against AUDUSD and NZDUSD while trading with a negative bias.
USDJPY rallied from the Asia open, rising from 112.28 to 112.72, bolstered by Thursday US GDP data, Trump’s tax plan and Fed rate hike expectations. The rally died in Europe and prices retraced to the overnight low in New York. Weaker than expected Retail Sales and Overall Household spending weighed on the yen.
EURUSD traded steadily in Asia and early Europe. EURUSD popped to the top of its overnight range (1.1703-1.1807), supported by a strong German unemployment report and EURGBP demand. New York trading extended EURUSD gains to 1.1831.
Sterling’s steady slide in Asia accelerated in Europe when Q2 was revised downward. (Actual 1.5% vs. forecast 1.7%) A widening of the Current Account deficit to £23.18 billion didn’t help. GBPUSD has since recovered from the 1.3354 low and is trading at 1.3395.
Bank of England Governor Mark Carney said that “in the relatively near term we can expect that interest rates would increase somewhat.” Traders ignored him.
WTI oil prices traded sideways overnight. Gold recovered earlier losses supported by the soft US dollar.
USDCAD Technical outlook:
The intraday technicals are mildly bearish while prices are below 1.2450 looking for a test of the uptrend line from September 15 which comes into play at 1.2405. Longer term, the USDCAD downtrend from the end of June is intact while prices are below 1.2520 (which is where this week’s rally stalled) A break of 1.2400 will lead to a retest of 1.2240. For today, USDCAD support is at 1.2405 and 1.2350. Resistance is at 1.2440 and 1.2510.
Today’s Range 1.2420-1.2520
Chart: 4 hour