USDCAD soared yesterday. It started climbing right from the 1.2952 Toronto open, continued throughout the day and touched 1.3157 in local trading this morning. The Canadian dollar losses are not entirely due to domestic issues, although they played a large role. Instead, the Loonie is a victim of collateral damage from FOMC and ECB monetary policies.
On Thursday, the ECB announced they would put an end to quantitative easing in December 2018. That was a hawkish development and not unexpected. EURUSD rallied from 1.1815 to 1.1848 on the news, but the strength was fleeting. The ECB also said that the key interest rate levels would stay unchanged until the summer of 2019. EURUSD collapsed, falling to an overnight low of 1.1544.
The soaring US dollar decimated the rest of the G-10 majors. Overnight, a minor bout of profit-taking lifted the Japanese yen while Euro and Sterling were close to flat. The commodity currency bloc added to their losses.
We could be in for another nasty day. The US is expected to announce another $50 billion in tariffs on Chinese imports, and China has said they would retaliate. Yesterday, Italy said that they would not ratify the EU free trade agreement with Canada because it didn’t offer enough protection for Italy’s speciality foods.
Overnight, EURUSD bottomed out at 1.1544 in early European trading and climbed to 1.1600 at the New York open. Eurozone CPI data was as expected.
Sterling hit a low of 1.3213 before rebounding to 1.3290 in early New York trading. The gains were likely due to profit taking ahead of the weekend. Bearish technical, concern that the BoE is dovish and Brexit issues are undermining the currency pair.
USDJPY is supported by the prospect of higher USD interest rates, but the rally stalled at 110.89 on a mix of concern about escalating trade tensions and soft US Treasury yields.
The antipodean currencies suffered a similar fate as the Loonie. They are under pressure due to good domestic monetary policy while the Fed is tightening.
Oil traders are nervously awaiting the results of next week’s Opec meeting in Vienna. There is concern that the cartel and Russia could announce an end to production quotas.
This morning US economic reports include Industrial Production, Capacity Utilization and the Michigan Consumer Sentiment Survey.,
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish above 1.2900. Yesterday’s decisive break above resistance in the 1.3040-60 area combined with the overnight move above the 2018 high of 1.3125 target gains to 1.3465. For today, USDCAD support is at 1.3110 and 1.3060. Resistance is at 1.3170, 1.3190 and 1.3260.
Today’s Range 1.3110-1.3210.