USDCAD is probing Friday’s lows following the stellar Canadian employment report and this morning’s bounce in WTI oil prices off the overnight low. The recent Canadian data supports the rebounding domestic economy outlook and should have erased any concerns that the Bank of Canada would contemplate a rate cut. In fact, rate hikes are expected in Q1 2018.
It should be a quiet couple of days; at least until Wednesday afternoon’s FOMC policy statement and Janet Yellen’s press conference. The Fed is almost unanimously expected to raise interest rates by 0.25%. The volatility will come from forecast changes and from discussions or news about when they will start shrinking the balance sheet.
GBPUSD is still digesting the UK election shock and how a minority government will handle Brexit negotiations. It is also probably just a matter of time when Theresa May will lose her job as Prime Minister. GBPUSD is hovering at the overnight low.
EURUSD appears to have dismissed Mario Draghi’s doveish outlook for the Eurozone and appear to me more concerned with risks associated with the ending of QE. EURUSD has rebounded from Friday’s low of 1.1166 and currently sits at 1.1228.
Asia got off to a quiet start thanks to a holiday in Australia. USDJPY stutter-stepped lower in Asia and Europe, dropping from 110.43 to 109.89. A decline in global equity markets and position adjustment ahead of Friday’s BoJ meeting undermined USDJPY.
AUDUSD and NZDUSD traded in tight ranges. Aussie opened in New York with a tiny gain compared to Friday’s close, while Kiwi had a tiny loss.
Oil prices have recovered from the overnight low. WTI touched $45.65 in Asia and jumped to $46.65 in early New York trading. A report that a pipeline leak could reduce Nigerian crude production is behind the move.
There isn’t any US or Canadian data due today, leaving traders to focus on the fall-out from the Comey testimony, Trump’s hostile tweets about Comey and the upcoming Senate testimony by Attorney General Jeff Session’s. It shouldn’t have any impact on FX markets, but stranger things have been known to happen.
USDCAD Technical outlook:
The USDCAD technical’s are bearish. A decisive break below 1.3400 would target 1.3035, although the move would not be a one-way street due to the proximity of major support levels. Fibonacci support is at 1.3385 representing the 50% level of the February-May range. The 100-day moving average is at 1.3378 and the 200-day moving average is at 1.3330. The intraday downtrend is at 1.3470 which guards the short-term downtrend line at 1.3510. for today, USDCAD support is at 1.3430, 1.3400 and 1.3390. Resistance is at 1.3470 and 1.3510
Today’s Range 1.3410-80
Chart: USDCAD 1 hour
Source: Saxo Bank