The Canadian dollar is getting hammered from all sides. Broad US dollar strength against the majors on March rate hike expectations, strong US data and weak oil prices have combined to fuel demand for USDCAD.
The latest catalyst was a slightly higher than expected ADP employment change report which supports calls for an above forecast Nonfarm payrolls data. Traders ignored higher than expected Canadian Building Permits data for January. (Actual 5.4% vs. forecast 5.0%, m/m)
The US dollar started with a bid in Asia helped by a large build in US crude inventories as reported by API. The 11.6-million-barrel increase drove WTI prices lower.
In New Zealand, a weaker than expected GlobalDairyTrade auction combined with disappointing China Trade data sent NZDUSD tumbling. The drop in NZDUSD undermined AUDUSD which also sank.
The China data helped drive USDJPY from 114.02 to 113.60 but that move didn’t last. USDJPY rallied to 114.11 as New York opened, supported by a small miss in Japan Q4 GDP which was 1.2% (forecast 1.6%, previous 1.0%) and US rate hike sentiment.
EURUSD inched lower ahead of Thursday’s ECB meeting and Friday’s US employment report. The ECB is expected to keep its doveish stance.
Sterling dropped from 1.2212 to 1.2160 due to Brexit concerns and general US dollar strength. Late yesterday, the British House of Lords amended the “Article 50 bill and gave politicians off all parties a “meaningful” say on the Brexit deal. The UK budget will be delivered shortly but should not have an impact on GBPUSD.
The rest of the day may be quiet with trader’s content to await the outcome of Thursday’s ECB policy meeting and press conference
USDCAD Technical outlook:
The intraday technicals are bullish while prices are above 1.3405. Prices need to clear resistance in the 1.3440-70 area to kick off the next leg of the rally which will lead to a test of 1.3600. Failure to break 1.3470 followed by a move below 1.3370 would suggest that a short-term top is in place and lead down to 1.3210. For today, USDCAD support is at 1.3405 and 1.3370. Resistance is at 1.3440, 1.3470 and 1.3520
Today’s Range 1.3405-1.3470.
Chart: USDCAD daily, noting “triple top “resistance
USDMXN bounced from the bottom of its one week range low of 19.4345 and pushed above resistance at 19.6200, supported by general US dollar strength, soft oil prices and the prospect of US Mexico trade hostilities. Mexico cancelled sugar export permits to the US to protest the pace of shipments.
The break above 19.6130 opens the door to further gains to 19.8000
Chart: USDMXN daily