The US dollar opened this morning under duress. It only managed to eke out a gain against the Australian dollar, and that currency was already at a lofty level. Nevertheless, the trading ranges weren’t that wide. Traders may be cautious, and volumes reduced ahead of event risk beginning with the G-7 meeting tomorrow and next week’s FOMC and ECB meetings.
USDCAD opened nearly unchanged from yesterday’s closing level. Sentiment is cautiously bullish due on fears that President Trump will announce that the US is exiting NAFTA. He likes to be the center of attention, and the spotlight is brightest at a G-7 meeting. The Bank of Canada semi-annual Financial System Review is released this morning. It should confirm BoC Governor Poloz’s earlier comments that although household debt is elevated, it is manageable.
The Province of Ontario election is today. Voters get a choice between two parties, both beholden to unions, who believe it is their divine right to spend money like a freshly paid sailor on shore-leave after eight months at sea. The third party will be very similar to the sailor on shore-leave, except he knows he doesn’t have any money. He is still going to party. FX markets usually ignore provincial elections, and this one shouldn’t be any different.
In Asia, concern about President Trump’s trade message to the G-7 leaders put downward pressure on USDJPY which slipped from 110.21 to 109.85. A small increase in US Treasury yields limited the losses.
AUDUSD fell to 0.7645 from 0.7671 on news the Trade surplus narrowed, although the slippage was minor. The thought of higher US interest rates while Australia rates remain unchanged weighed on the currency. NZDUSD was steadier and traded in a narrow 0.7034-0.705 range.
EURUSD traded with a bullish bias overnight and is trading at the top of its 1.1774-1.1836 range in New York. Prices are supported by the renewed focus on the ECB ending QE. Eurozone Q1 GDP data was as forecast, rising 0.4%,q/q and 2.5%, y/y.
GBPUSD tracked EURUSD higher, rising from 1.3412 to 1.3471 with an added boost from strong May Halifax House Price data (Actual 1.5% vs forecast 1.0%) Renewed “hard” Brexit concerns arising from the unresolved Irish border issue have capped gains.
Bank of Canada Governor Stephen Poloz holds a press conference at 1615 GMT to discuss the Financial System Review.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish while prices are above 1.2870, looking for a break above 1.2980 to extend gains to 1.3065 and then 1.3125. A break below 1.2870 would lead to 1.2840. for today, USDCAD support is at 1.2920 and 1.2870. Resistance is at 1.2990 and 1.3130.
Today’s Range 1.2920-1.3020