It’s Halloween, and the Loonie got spooked. USDCAD was hovering around 1.2840 when August GDP, September Industrial Production and Raw Material’s data were released. It wasn’t pretty.
Gross Domestic Product dropped 0.1%. The forecast was for a 0.1% gain or even higher. Raw Materials (-0.4%) and Industrial Production (-0.1%) were well below their forecasts for an increase 0.4%, respectively. The Canadian dollar paid the price for the disappointment. USDCAD soared, reaching 1.2912 (at the time of writing) and is aiming at Fibonacci resistance at 1.2925.
The US dollar got a minor bump from better than expected Q3 Employment Cost Index. (Actual 0.7% vs forecast 0.6%)
Traders are looking ahead to the Case-Shiller Home Price Index and the Chicago PMI due later in the session.
Today is also month end. The large gains in US equity indices vis a vis the TSX suggest portfolio rebalancing flows will lead to USDCAD selling.
The US dollar started the day in New York with a firming bias, albeit well within recent ranges.
FX markets were nervous, spooked and leery. They were nervous due to the arrest of President Trump’s former campaign manager. They were spooked by on-going rumours that Trump will announce a new nominee for Fed Chair on Thursday. They were leery ahead of Wednesday’s FOMC policy announcement.
Overnight, the Bank of Japan left interest rates and policy unchanged as expected. The BoJ downgraded their inflation forecast for 2017/2018 inflation, to 0.8% from 1.1% while still predicting CPI to hit the 2.0% target by 2020. USDJPY barely budged on the news and drifted in a 112.97-113.30 band.
NZDUSD dropped from 0.6879 to 0.6840 because of weaker-than-expected October Consumer Confidence (Actual -10 vs previous 0.0) A new Labour government will do that to a currency.
AUDUSD was undermined by soft NBS China PMI data (51.5 vs forecast 52.0)
In Europe, EURUSD see-sawed in a tight 1.1626-1.1652 band with traders awaiting Wednesday’s FOMC meeting.
Sterling steadied with a bias toward the recent peak, supported by the prospect of a Bank of England rate hike on Thursday.
Oil prices were steady. WTI traded in a $53.96-$54.25 range supported by continued chatter that Opec oil production cuts are to be extended.
The former President of the Catalonia region of Spain fled to Brussels, to avoid arrest. It may have had the added benefit of defusing the crisis as he may have a hard time of calling his troops to action well he hides in safety.
The arrest of Trump’s former campaign manager will be a distraction as will the Jerome Powell for Fed Chair stories.
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish while prices are above 1.2750 looking for a break above Friday’s peak to extend gains to 1.2925, 1.2970 and then 1.3100. This morning, post GDP rally stalled just below 1.2925, the 50% Fibonacci retracement level of the 2017 range. A decisive break above 1.2925 targets 1.3130, the 61.8% retracement level.
For today, USDCAD support is at 1.2840and 1.2810. Resistance is at 1.2925 and 1.2970
Today’s Range 1.2840-1.2925
Chart 4 hour