West Texas Intermediate (WTI) crashed through support at $50.00/barrel and plunged to $47.87/b in early European trading, a level last seen in September 2017. Prices bounced to $48.55/b at the New York open. Rising concerns for a 2019 global economic slowdown, expectations for increased US Shale production to overpower Opec production cuts, and equity market weakness contributed to the drop in prices. Fresh selling was seen after China President Xi Jinping’s speech overnight didn’t offer new stimulus measures.
In Europe, the German IFO Current Assessment, Business Climate and Expectations, survey were disappointing but apparently not to EURUSD traders. The single currency broke above 1.1365 in Asia, and it hasn’t looked back. Prices are flirting with 1.1400 and traders are looking for a break above 1.1450 to confirm that short-term bottom is in place. EURUSD is supported by speculation of a “dovish” FOMC rate hike tomorrow due to free-falling US stock prices.
GBPUSD is tracking EURUSD higher but remains vulnerable to Brexit headlines. A move above 1.2750 would target further gains to 1.2850.
Xi Jinping’s speech didn’t excite Asia equity traders. They took their cue from yesterday’s over 2.0% plunge on Wall Street and sold stocks. USDJPY fell due to risk aversion fears and got an added boost as US Treasury yields slid. USDJPY dropped from 112.84 to 112.89.
AUD & NZD
Broad US dollar weakness lifted AUDUSD and NZDUSD. Kiwi got an added lift after ANZ Business Confidence Index rose. (Actual -24.1 vs November -37.1)
US November Building Permits and Housing Starts data are due this morning as is Canada Manufacturing Shipments. Wall Street price action and risk sentiment will drive FX markets today.
USDCAD gains from oil price weakness were stymied by broad US dollar weakness against the G-10 major currencies. Bank of Canada Governor Stephen Poloz warned in a Globe and Mail interview that an all-out US-China trade war was the biggest threat to the global economy in 2019. Traders are also concerned about a weaker than expected Canadian inflation report being released on Wednesday.
The intraday and short term USDCAD tehnicals are bullish. There is uptrend line support at 1.3240 and again at 1.3360. Traders are looking for a break of resistance in the 1.3440-80 zone to lead to 1.3550 A break below 1.3360 could lead to 1.3240 but that level is guarded by support at 1.3320 and 1.3280. Today’s Range 1.3360-1.3440