There is a lot of ‘event” risk on Thursday.
1) Ex-FBI Director James Comey testifies before a Senate committee. Will he testify that the FBI had an open file on Trump? Did Trump try to use his influence to kill the investigation into former National Security Advisor Michael Flynn? Will he provide enough evidence for impeachment chatter?
2) ECB meeting: EURUSD has been rising due to expectations that the ECB will shift their policy stance from doveish to somewhat hawkish? Mario Draghi’s latest speech implies that the market has it wrong. Stay tuned.
3) UK election: Conservative majority? Labour Majority? Hung parliament? A Labour win suggests a softer Brexit. A Conservative victory continues the hard Brexit stance. A hung parliament is a dogs breakfast and likely GBPUSD negative..
The overnight session had some excitement, particularly in Japan. The risks mentioned above combined to spark risk aversion USDJPY selling with the break below 110.25 exacerbating the move lower. USDJPY dropped from 110.52 to 109.29 in early New York trading.
Elsewhere, AUDUSD managed to hang on to yesterday’s gains following the Reserve Bank of Australia policy meeting. The RBA left rates unchanged (as expected) and delivered a neutral statement. It was enough to keep AUDUSD bid but not enough to extend gains above 0.7500.
New Zealand fared better than Aussie. Broad US dollar weakness and hopes for an increase in prices at today’s GlobalDairyTrade auction kept prices firm.
Oil prices maintained a negative bias. WTI traded in a $46.97-$47.72 range. Gold prices rallied from a low of $1,279.91 to 1,291.62, where they currently sit, supported by the soft greenback.
USDCAD edged lower on broad US dollar weakness although low oil prices limited the downside. It bounced toward the top end of the range in early New York trading.
USDCAD may see some excitement when this today’s Ivey PMI data is released. (Forecast 62.0 vs. 64.0) It is a volatile number and its impact is fleeting.
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish and the short term technicals are bullish. Intraday, the USDCAD downtrend stays intact while prices are below 1.3490 and 1.3520.
The short term technical are bullish while 1.3440, the uptrend line from the April low 1.3225, is unbroken. It is also the 61.8% Fibonacci retracement level of the April/May range.
A break below 1.3440 targets 1.3360 while a move above 1.3520 would negate the downward pressure. For today, USDCAD support is at 1.3440 and 1.3410. Resistance is at 1.3490 and 1.3520.
Today’s Range 1.3440-1.3490
Chart: USDCAD 1 hour