Overnight Range 1.3254-1.3354
FX traders in Asia got the first look at the Italian Referendum results. They were not impressed. EURUSD tanked on news that the government was soundly defeated in the referendum on political reform. The Prime Minister, Matteo Renzi said he would resign today.
EURUSD dropped from 1.0606 to 1.0506 where it found a floor. It chopped around in a .0080-point range until Europe opened and then recouped all of it’s Asia losses.
The immediate conclusion Is that whatever happens in Italy is, for now, an Italian problem. ECB Governing Council Member Ewald Nowotny said that Italy may need to bail out some of its banks.
New Zealand had its own political issue. Prime Minister John Key resigned suddenly, saying that after 8 years it’s time for someone new. NZDUSD declined from 0.7138 to 0.7067.
An attempted rally in Europe stalled, and NZDUSD opened in New York just above the Asia low AUDUSD moves mirrored those of Kiwi (or vice versa)
In Japan, traders were unperturbed by the Italian results and focused their attention on Friday’s strong US payrolls report. They rallied USDJPY from a low of 111.80 to 114.25 just prior to the New York open.
Euro area Markit Services PMI data releases were ignored, overshadowed by the Italian events.
That wasn’t the case in the UK. The Markit Service PMI was 55.2, beating the 54.2 forecast and climbed to 1.2745.
Oil prices traded sideways until mid-morning in Europe when they rallied. WTI rose form an overnight low of $51.02 to $52.35 at the New York open. Oil traders are still basking in the glow of the November 30 Opec production cut announcement.
USDCAD tested key support in the 1.3250 area in Asia but that move was quickly rejected. It climbed back to 1.3360 and then drifted lower on the back of the rise in oil prices.
There is not much in the way of US data to raise concerns. Markit Services PMI and ISM non-manufacturing PMI are on tap but in the wake of Friday’s non farm payrolls report, they will have little impact. Instead traders will be talking about the Italian referendum and its implication for the Eurozone in the months ahead. Traders will also take note of Donald Trump’s aggressive comments towards China in a series of tweets. China’s response will be interesting.
USDCAD technical outlook
The intraday USDCAD technicals are bearish while trading below 1.3390 looking for a retest of support in the 1.3250 area. If the support gives way, USDCAD would drop to 1.3190, the uptrend line from the September low. A break above 1.3390 would lead back to 1.3580. for today, USDCAD support is at 1.3280, 1.3250 and 1.3205. Resistance is at 1.3350 and 1.3390
Today’s Range 1.3250-1.3350
Chart; USDCAD 1 hour