USDCAD closed at 1.2696, yesterday and was sidelined in Asia. European traders drove it to 1.2659 ahead of the New York open.
The Bank of Canada is widely expected to leave rates unchanged this morning. However, a slew of better than expected Canadian economic data has raised the risk for a hawkish statement. The BoC is on record for stating that “stimulus must be removed,” and today’s statement may hint at a January move.
AUDUSD fell from 0.7610 to 0.7573 when Australia Q3 GDP miss forecasts (Actual 0.6%, forecasr 0.7%, Prvious 0.9%, q/q)
NZDUSD climbed from 0.6872 to 0.6915 ON A 0.4% rise in GlobalDairyTrade auction prices.
USDJPY was sold, falling from 112.60 to 112.00. A Bank of Japan official made noises about side-effects from Quantitative and Qualitative Easing, and concerns of a US government shut-down on Friday led to the selling.
EURUSD was steady overnight, trading in a 1.1813-1.1846 range. Traders are torn between US tax
reform expectations and US government shutdown concerns.
Sterling was under pressure from the open in Asia until the New York open. Traders are concerned that the UK and the EU won’t be able to secure a deal to proceed to the next phase of negotiations by the EU deadline of Friday.
There is a whiff of geopolitical risk in the air. President Trump, the noted mid-East scholar, reportedly plans to announce that Jerusalem is the capital of Israel and move the American embassy there.
If the Bank of Canada statement is thought to be hawkish, USDCAD will probe support in the 1.2500-40 area. If it is dovish, USDCAD will be looking for a test of 1.2800. Concerns that NAFTA could collapse will put a floor under USDCAD in the 1.2500 area, while firm oil prices should cap gains around 1.2900.
US politics and President Trump’s decision to inflame mid-East tensions could boost risk aversion sentiment. US data releases (Factory Orders, ISM NY Business conditions) will not be a factor.
USDCAD Technical outlook:
The USDCAD technicals are bearish. The move below 1.2730 snapped the uptrend line from September. Yesterday’s break below 1.2660, (38.2% Fibonacci retracement of September-November range) targets 1.2580 (50% retracement) and 1.2505. (61.8% retracement). The intraday technicals are bearish while prices are below 1.2715, targeting a break of 1.2629 (yesterday’s low) to test 1.2580. For today, USDCAD support is at 1.2630 and 1.2580. Resistance is 1.2715 and 1.2760.
Today’s Range 1.2580-1.2715