FX markets remained subdued, reluctant to dive headfirst into the 2018 FX markets ahead of this afternoon’s release of the FOMC minutes. Japan was closed for a bank holiday which further reduced liquidity and trading incentive.
The antipodean currencies dipped then rallied and ultimately opened this morning unchanged from yesterday’s close.
USDJPY drifted in a 112.18-112.38 range, albeit with a bearish bias following the failure to sustain gains above 113.50, last week.
In Europe, EURUSD was on the defensive. Profit-taking ahead of today’s FOMC minutes overshadowed better-than-expected German employment data.
GBPUSD peaked at 1.3611, drifted down to 1.3571 and opened at 1.3595. UK Construction PMI was 52.2 vs forecast of 52.5, helping to undermine the currency pair.
Oil and Gold prices remained firm. WTI oil climbed steadily,m rising from $60.15/b to $60.71/b. At the moment, traders don’t seem concerned about the risk of increased US shale production. I’m sure that will change, soon. Gold is trading at $1,314.65, slightly below yesterday’s close.
The Canadian dollar flirted with the 85 cent level but couldn’t crack it. There are rumours of sizeable option expiries at 1.2500, again today which may limit USDCAD losses.
President Trump’s boast that his nuclear button was bigger than Kim Jong-un’s nuclear button did not cause any risk aversion trading.
Canada’s Ambassador to Indonesia demonstrated a “cluelessness” level that would make Justin Trudeau envious. The ambassador regaled about the beauty of Myanmar beaches in a tweet, oblivious to the human rights drama unfolding in the country
The release of the FOMC minutes this afternoon will likely put a damper on trading even though they should not have much of an impact. The FOMC board make-up changes drastically in January. Janet Yellen is out, replaced by Jerome Powell. The two members who voted against raising rates in December, Charles Evans and Neel Kashkari are gone. They are replaced by Loretta Mester (a hawk) and by San Francisco Fed President John Williams and Atlanta Fed President Raphael Bostic., both considered middle of the road.
This morning’s US data includes ISM Manufacturing PMI (forecast 58.1) and construction PMI.
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish while prices are below 1.2550 looking for a break of the 1.2490-1.2500 area to extend losses to 1.2440 and then 1.2410. A break above 1.2550 would extend gains to 1.2620 and then 1.2660. For today, USDCAD support is at 1.2490 and 1.2440. Resistance is at 1.2550 and 1.2590.
Today’s Range 1.2490-1.2590