USDCAD open: 1.3930, overnight range 1.3914-1.3942, close 1.3920
USDCAD traded with a modest bid in an otherwise uneventful overnight session then ticked higher following todays US retail sales numbers. Nevertheless, traders are content to await this afternoons FOMC decision.
Mark Carney’s Canada Investment Summit appears to have lived up to the hype. Carney announced a permanent tax deduction allowing companies to immediately write off the full cost of building or buying a whole range of assets. The government has shifted its oil and gas priorities to attract new infrastructure investment.
Reuters reported that European Union Commissioner Ursala von der Leyen announced the EU was considering Canada as and “associate member.” The FT then reported “no, they are not,” because they are afraid of Trump’s reaction.
The Summit is a step in the right directions but none of the announcements mean diddley-squat for short-term USDCAD direction.
WTI oil traded in a $102.97-$105.64 range. News that Saudi Arabia would ship more oil via Oman helped to ease some supply disruption concerns.
The only Canadian data today is second-tier Housing Starts for August and Building Permits for July.
USDCAD Technicals
The intraday USDCAD technicals are bullish above 1.3910 and looking for a break above 1.3970 to test resistance in the 1.4010 area. A move below 1.3910 suggests a retest of the 1.3840 area.
The 1.3760-1.4010 range that has contained price action since the middle of July remains intact while prices are below the 1.4010 area. A topside breaks targets 1.4130 and then 1.4250.
For today, support is 1.3910 and 1.3850. Resistance is 1.3970 and 1.4010
Today’s range 1.3910-1.4010.
FX Heat Map
FX open high low 6:00 am
Fed Rate Hike is Locked
The Fed is going to raise rates by 25 bps to 4.00% today. The CME odds for such a move are 92.5%. A week ago, they were 61.2% and it was only a month ago when they were just 33.1%. Economist-in-Chief Trump saw the 162,000 gain in nonfarm payrolls and tweet-screamed a demand for the Fed to cut rates. He put a guy who would do his bidding in the Fed Chair, or so he thought. With that in mind, Warsh will announce a rate hike to appease the market and then his remarks will be aimed at appeasing Trump. If so, it could kick off a rather choppy and volatile post-FOMC session. The usual FOMC projections will also be released.
The US dollar spent a quiet overnight session and opened in NY with modest gains, underpinned by higher crude prices and a near 5.0% U.S. Treasury yield.
US Retail Sales were robust, rising 1.2% m/m in August compared to a 0.5% decline In July. Retail Sales ex-autos rose 1.4% m/m compared to a0.2% decline previously.
Taking Stock
Asian equities closed higher with Japan’s Topix rising 0.61%, the Hang Seng gaining 0.19% and Australia’s ASX 200 rising 0.28%.
As of 5:30 am PT, European bourses are higher led by the UK FTSE 100, which has gained 0.65%. The French CAC 40 is up 0.59%, and the German DAX has risen 0.36%. S&P 500 futures are up 0.33%, the 10-year Treasury yield is 4.981%, the DXY is 99.73 and gold is $4,339.71.
EURUSD | Range 1.1528-1.1557
EURUSD is at its session lows in early NY trading due to the increase in crude prices and ahead of the expected 25 bp Fed rate hike. Eurozone industrial production was -0.1%, unchanged from June.
GBPUSD | Range 1.3446-1.3497
GBPUSD is at the bottom of its overnight band. UK inflation numbers were higher but not high enough to suggest that the Bank of England will raise interest rates at tomorrow’s meeting. Headline CPI rose 3.1% y/y in August as expected, but two-ticks higher than in July. However, PPI input prices jumping to 6.1% from 5.8%, and output prices to 3.7% from 3.3%, suggest that pressures are stronger than the consumer CPI numbers alone imply.
USDJPY | Range 154.89-155.49
USDJPY traded higher alongside the increase in crude prices. Weaker than expected GDP data didn’t help. Reuters reports that Japan’s economy expanded an annualised 1.1% in the April-June quarter compared with a median market forecast for a 2.0% increase. Japan reported a trade deficit of $7.13 billion USD in August due to a surge in oil imports.
AUDUSD | Range 0.7120-0.7140
AUDUSD traded narrowly due to broad US dollar strength and a lack of interest ahead of today’s FOMC meeting and from rising US Treasury yields.
USDMXN | Range 17.1084-17.1613
USDMXN traded narrowly, but the recent gains from the September 4 low appear to be just a correction while prices are below 17.3050. Mexican markets are closed today for Independence Day celebrations.
CHINA
- PBoC Fix 6.7628 vs Exp. 6.7148 (prev. 6.7670).
- Shanghai Shenzhen CSI 300 rose 0.68% to 4,480.27
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
