Overnight Range 1.3358-1.3450
Sterling got polished during the European session. After going nowhere in Asia, GBPUSD screamed higher in Europe thanks to comments from Brexit Minister David Davis.
He said that the UK government would consider making EU budget contributions in return for access to the Eurozone. GBPUSD rose from 1.2503 to 1.2650 on the news. The prospect of a “soft” Brexit forced traders to overlook a weaker than expected Manufacturing PMI report which came in at 53.4 vs. forecast of 54.5.
Asia traders were excited by yesterday’s Opec announcement that that they would reduce production by “around 1.2 million barrels per day” starting January 1, 2017, launched WTI prices into orbit. Asia traders added to New York gains and took WTI to $50. 21 from the New York close of $48.95. A European retreat was short lived and WTI is at $50.54, the session high.
In Asia, the improved risk tone from rising crude prices pushed AUDUSD and NZDUSD higher. That changed when Australia announced a weaker than expected Capex survey. Both currency pairs erased all their Asia gains by the start of trading in New York.
USDJPY retreated from Wednesday’s New York close throughout the Asia session but recouped all the losses by the start of New York trading. The prospect of higher US rates, sooner than expected, is driving the gains.
EURUSD traded sideways in Asia and inched higher in Europe. Eurozone PMI rose to 53.7 in November, from 53.5 in October, as expected. The drop in Eurozone unemployment rate of 9.8% is a big deal in the press as it is at a seven-year low. The data releases did not have much impact on trading as diverging EU/US interest rate paths are the key currency drivers.
The Opec deal has not manifested itself into a strong Loonie. The initial USDCAD sell=off on the Opec news, stalled right on major support at 1.3360. It has bounced between 1.3375 and 1.3440 since then with traders now focused on risks emanating south of the border.
The announcement of the Opec deal means FX traders must look elsewhere for things to worry and fret about. Friday’s US employment report and this weekend’s Italian Election and the US interest rate outlook are now in the spotlight.
The major US economic report today is the US ISM Manufacturing PMI data for November. Economists forecast an improvement to 52.2 from October’s 51.9 reading. At this point, with the December 14 FOMC meeting just two weeks away and following a flood of strong US data reports, the importance of today’s ISM release is diminished.
Traders will be wary of Friday’s nonfarm payrolls report (Forecast 175k) and the Italian Referendum on the weekend. USDCAD trading will be governed by general US dollar sentiment and oil prices, if WTI breaks the two-year downtrend line at $51.60/barrel.
USDCAD technical outlook
The intraday USDCAD technicals are bearish while trading below 1.3450 looking for another test of support at 1.3360. A break below 1.3360 will lead down to 1.3305 and then 1.3280. A move above 1.34550 will target 1.3580. The 1.3660-1.3580 range has been intact since November 9 as USDCAD consolidates gains made after breaking the 5-month peak on October 20. For today, USDCAD support is at 1.3380 and 1.3360. Resistance is at 1.3450 and 1.3490.
Today’s Range 1.3380-1.3460