July 12, 2019
USDCAD Open (6:00 am EDT) 1.3032-35 Overnight Range 1.3020-1.3070
USDCAD drilled through the 2019 low of 1.3040 in Asia and dropped to 1.3020 before it found a floor. And there are a lot more floors between 1.2960 and 1.3000, suggesting further downside moves may be a struggle. USDCAD is suffering from the surge in oil prices, narrowing CAD/US interest rate differentials and broad US dollar weakness. However, a Fibonacci retracement analysis suggests that if 1.2960 breaks, prices could drop to 1.2798 with 1.2589 lurking in the wings.
USDCAD sellers emerged as AUDUSD and NZDUSD rallied, benefitting from US dollar weakness from dovish Fed monetary policy. News that China’s trade surplus with the US widened, capped the rally.
USDJPY traded higher, rising from 108.25 to 108.60, supported by US 10 year Treasury yields rising to 2.139%,
In Europe, EURUSD traded sideways. Demand from better than expected Eurozone Industrial Production (Actual 0.9% vs forecast 0.2%, m/m, s/a) was offset by dovish comments from ECB official and Bank of Italy Governor Visco suggest further easing measures will be necessary if economic growth stagnates.
GBPUSD drifted higher due to pre-weekend profit-taking. However, gains should be limited due to lingering Brexit concerns.
The West Texas Intermediate (WTI) oil price rally stalled at $60.88/barrel yesterday and prices have dipped to $60.29 in New York. Opportunistic demand from elevated Iran/US and UK tensions coupled with potential supply disruptions from Tropical Storm Barry were overshadowed by the latest International Energy Agency report. The EIA said that oil supplies will outpace demand in the next nine months due to surging US production.
FX direction may be driven by profit-taking ahead of the weekend. The only data of note is USD PPI, and it shouldn’t be much of a factor.
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish following the break of the 2019 low at 1.3040 which has set the stage for a test of major support in the 1.2990-1.3000 area. A break below 1.2960 targets 1.2798. A break above 1.3040 would extend gains to 1.3090 and 1.3120.
Today’s Range 1.2990-1.3050
Chart: USDCAD 4 hour