USDCAD finished yesterday with a bid tone and appeared to be heading higher in the overseas session. That changed as quickly as it took a missile launched from North Korea to pass over Northern Japan The overtly hostile act by Kim Jung-Un outraged Japanese Prime Minister Shinzo Abe who called I a “most serious and grave” threat. President Trump chimed in announcing that the US was 100% with Japan. Later on, he added that “all options are on the table.”
FX markets reacted predictably. USDJPY and USDCHF were sold, and gold prices soared. USDDJPY plunged from 109.22 to 108.27, USDCHF fell from 0.9551 to 0.9429 and gold prices rose from $1,13.64 to $1,325.85. Prices have reversed slightly since New York opened but in an unconvincing manner.
The antipodean currencies rallied and are trading in New York at their overnight peaks.
EURUSD rallied hard. The single currency blasted through 1.2000 in the wake of the missile launch and reached 1.2069 before flaming out. EURUSD got an added boost from better than expected German Consumer Confidence data.
GBPUSD tracked EURUSD higher, and climbed to 1.2977 from 1.2922. Traders focused on broad US dollar weakness rather than complaints from the European Union’s chief negotiator about the pace of the Brexit talks.
The North Korea missile led to a drop in global equity indices. US equity futures suggest that Wall Street will open with a negative tone.
Oil prices have been resilient in the face of Hurrican Harvey. WTI traded in a $46.41-$4694 range. Gas prices may have limited upside due to large US inventories
USDCAD dropped like a rock, falling from 1.2532 to 1.2442 overnight but was unable to sustain the losses. Prices have rebounded to 1.2502 in early New York trading. Expectations for a soft Canadian GDP report on Thursday and risks ahead of Friday’s US non-farm payrolls data will underpin USDCAD.
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish below 1.2520. The downtrend from August 16 survived a test overnight, and the subsequent reversal suggests a test of the 2017 low in the 1.2410-15 zone. A break below 1.2410 targets 1.2340 and 1.2280. Only a move above 1.2860 would negate the bearish outlook. For today, USDCAD support is at 1.2440 and 1.2410. Resistance is at 1.2490 and 1.2540.
Today’s Range 1.2460-1.2530
Chart: USDCAD 4 hour