The Loonie is in the cross-hairs, and the US NAFTA representatives are aiming the rifle. Today is the official kick-off of the Canada, Mexico, and US free -trade agreement demanded by President Trump who called NAFTA “the worst deal ever.”
This morning US housing data missed the mark, continuing the string of solid and then soft US economic reports. Housing Starts dropped by 4.8% in July, worse than the gain of 0.5% predicted and completely erasing the 8.4% rise seen in June. Building Permits suffered a similar fate. They were down 4.1% in July compared to June’s 7.4% increase.
Today’s data serves to undermine the positive US dollar sentiment seen after yesterday’s robust Retail Sales report.
Data surprises were the norm in European trading. Eurozone GDP rose 2.2% in Q2 (seasonally adjusted) beating the 2.1% forecast. Other areas recorded higher than expected GDP data as well, suggesting that the Eurozone recovery is chugging along and broad based.
EURUSD bounced inside at 1.1692-1.1757 range after the GDP news and has since settled into a 1.1700-20 range in New York.
GBPUSD rallied from a 1.2843 low to 1.2901 when the European and UK employment reports were released. The unemployment rate dropped to a 44 year low of 4.4%, while Average earnings rose 2.1% in the three months ending in June, beating the 1.8% forecast.
In Asia, USDJPY edged higher, in a 109.55-109.93 range, supported by Tuesday’s US retail sales gain and a further erosion of risk aversion.
The Australian dollar was the best performing major currency overnight. AUDUSD rallied steadily from the opening low of 0.7817 to 0.7867 on profit taking and an upward revision to domestic wage data.
The New Zealand dollar was not as robust. NZDUSD inched higher in a narrow 0.7225-0.7251 range.
USDCAD was sidelined in Asia but moved lower in Europe and again after the US data. However, further losses below 1.2700 are unlikely until after the release of the FOMC minutes at 11:00 PDT. Dovish minutes could drive USDCAD to 1.2660 while hawkish minutes will lead to another test of resistance at 1.2770
USDCAD Technical outlook:
USDCAD is in an uptrend channel from August 1. The lower boundary is at 1.2700 and the upper boundary is at 1.2815. If the lower level stays intact, the channel top is the target. A decisive break below 1.2660 is needed to suggest a short-term top is in place and target support at 1.2550. For today, USDCAD support is at 1.2705 and 1.2680. Resistance is at 1.2750 and 1.2770.
Today’s Range 1.2705-1.2770
Chart: USDCAD 4 hour