USDCAD bulls are stampeding for the exits. Last Friday’s stellar Canadian employment report was followed by a Bank of Canada policy about face. Yesterday, Senior Deputy governor Carolyn Wilken’s acknowledged recent Canadian economic strength and hinted that interest rate hikes were likely, far sooner than anyone had anticipated.
She said “If you saw a stop light ahead, you would begin letting up on the gas to slow down smoothly. You don’t want to have to slam on the brakes at the last second. Monetary policy must also anticipate the road ahead.”
Then Canada bond yields surged, USDCAD sank and support levels crumbled. That sentiment carried into Asia and Europe, making the Canadian dollar the best performing G10 currency when New York opened.
The other FX markets were far more subdued due to concerns surrounding Wednesday’s FOMC meeting. Will it be another “doveish” hike? Will the Committee upgrade forecasts and the prospect of additional rate hikes 2017? Will they announce how balance sheet shrinkage will occur? And when?
Those concerns and others contained EURUSD in a 1.1186-1.1223 range and USDJPY inside a 109.83-110.26 band. Sterling wasn’t quite fettered by FOMC concerns. Better than expected UK inflation data propelled GBPUSD from 1.2643 to 1.2735. However, Brexit concerns, Wednesday’s U employment report and Thursday’s Bank of England meeting combined to temper trading enthusiasm.
AUDUSD and NZDUSD gave back overnight gains in early New York trading.
Oil prices are struggling to maintain upside momentum despite news that Saudi Arabia appears willing to increase production cuts. That’s because Opec announced that April crude production rose 340,000/bpd, thanks to Libya and Nigeria. WTI drifted down from the overnight high of $46.38 to $45.93.
USDCAD Technical outlook:
The USDCAD technical’s are bearish. The break of the uptrend line from February, combined with the move below the 100 and 200 day moving averages and the breach of 1.3280 (61.8% Fibonacci retracement of February-May range, imply further losses to 1.3162.
The intraday technicals are bearish but the steepness of the move and tomorrows FOMC meeting suggest a period of consolidation may be in order. For today, USDCAD support is at 1.3230, 1.3190 and 1.3160. Resistance is at 1.3290 and 1.3330
Today’s Range 1.3210-1.3280
Chart: USDCAD 4 hours