Tuesday was a rather nasty day in equity markets. TV talking heads breathlessly announced the 1,175 drop in the Dow as “the largest in history” while ignoring the obvious correlation to the Dow’s unprecedented gains in January. You knew the piper was going to be paid; timing the payment was the difficult part.
The equity free-fall spilt over into Asia markets with the Nikkei 225 down 4.73% European markets are well above their worst levels but still below yesterday’s close.New York equity futures are pointing to a lower open
Yesterday’s US dollar rally appeared to have stalled in overnight FX markets but resumed in early New York trading. EURUSD, which couldn’t break below support in the 1.2350 area in Asia or Europe, managed the feat at the start of the New York session. That hangs a target on the 1.2270 level with 1.2220 support lurking in the back ground.
Initial, risk-aversion, USDJPY selling bottomed out at 108.50 support and prices climbed steadily until reaching 109.31, mid-morning in Europe. Comments from various Japanese authorities were an attempt to limit yen gains. Those gains have been extended, and USDJPY is trading at 109.50.
The bottom fell out of GBPUSD. Fresh “hard” Brexit concerns this week, and stretched long GBPUSD positioning got snared by the US dollar rally triggered by free-falling equity markets. GBPUSD plummeted from a 1.3998 peak to 1.3860. Technicals warn that a break below 1.3840 risks further losses to 1.3450.
AUDUSD traders did not have a good day. The currency pair was already suffering from broad US dollar strength when Retail Sales and Trade data were worse than expected.. AUDUSD selling accelerated. The RBA did not surprise anyone and left rates unchanged at 1.5%. The statement was neutral. The NZDUSD outperformed its antipodean counterpart. NZDUSD rallied and opened in New York with a gain compared to Monday’s close.
Oil prices declined, caught up in the equity market rout and rise in the US dollar. However, WTI prices are well above the $60.00/barrel level supported by expectations of steady global demand.
USDCAD rallied, having to contend with falling equity markets, a rising greenback and Justin Trudeau’s comments on NAFTA. However, the rally stalled at 1.2560 resistance.
FX markets will be whippy today and take their direction from Wall Street. USDCAD traders will also contend with domestic data. Canada’s Trade deficit is expected to narrow to -$2.20 billion from -$2.54 billion Ivey PMI. (forecast 61.0) could provide the Loonie with a bit of support if the result surpasses expectations
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish. The break above 1.2400-05 negated the downtrend from December. That level will revert to support and be guarded by additional support in the 1.2440-60 area. USDCAD resistance is in the 1.2560-90 area which if broken will extend gains to 1.2620 and then 1.2680. For today, USDCAD support is at 1.2510 and 1.2480. Resistance is at 1.2560, 1.2590 and 1.2610.
Today’s Range 1.2480-1.2580