July 31, 2019
USDCAD open (6:00 am EDT) 1.3146-50 Overnight Range: 1.3130-1.3181
Canada GDP data was better than expected and USDCAD dropped on the news. Statistics Canada said “Real gross domestic product was up for a third consecutive month in May, rising 0.2%. The increase was led by a rebound in manufacturing with 13 out of 20 industrial sectors expanding. On a three-month rolling average basis, real gross domestic product increased 0.7%.
Weaker than expected Raw Material and Industrial Product Price Indices limited USDCAD losses. The 1.4% drop in Inustrial Prices was entirely due to Canadian dollar appreciation while lower crude prices explained most of the Raw Materials Price decline.
USDCAD dropped to 1.3130 from 1.3150 on the news. It could fall further heading into the 8:00 am PDT “fixing” on the back of portfolio rebalancing flows.
The US dollar opened in New York on a mixed note after a somewhat choppy, data-driven overnight session. The US/China trade talks ended without much in the way of progress.
Official China Manufacturing PMI data for July was higher than expected and better than the June report. However, Non-Manufacturing PMI was slightly worse than forecast.
The Chinese data combined with higher than expected Australia Q2 CPI (Actual 1.6% vs forecast 1.5%) and month-end portfolio rebalancing demand lifted AUDUSD from 0.6864 to 0.6898. NZDUSD fell following weak Consumer Confidence data but managed to retrace most of the losses.
USDJPY traded sideways in a 108.51-108.64 range on the back of steady US Treasury yields and ahead of this afternoon’s FOMC meeting.
EURUSD peaked at 1.1161 in Asia and then dropped to 1.1144 by the New York open. Disappointing Eurozone data refocused traders on ECB rate cut risks. CPI rose 1.1% y/y in July, as expected but lower than June’s 1.3% y/y result. Core CPI, at 0.9% was worse than forecast and below June’s 1.1% increase.
GBPUSD continues to consolidate recent losses. Prime Minister Johnson is in Ireland to discuss the Brexit border issue. Month-end portfolio rebalancing demand underpinned GBPUSD.
Yesterday’s American Petroleum Institute report showed US crude inventories fell 6.024 million barrels in the week ending July 26 supported oil prices.
USDCAD Technical Outlook
The intraday technicals consolidating in a tight 1.3030-1.3190 range. A break below 1.3030 suggests a retest of support in the 1.3040-50 area while a break above 1.3190 targets 1.3250. A break above 1.3250 opens the door to a test of resistance at 1.3420. Longer term, the uptrend from February is intact while prices are above 1.3020. Today’s Range 1.3080-1.3170.