USDCAD tracked broad US dollar movements but with a lack of enthusiasm ahead of today’s Bank of Canada interest rate decision. The Bank of Canada is widely expected to raise the overnight rate by 0.25 bps to 1.25%. The uncertainty stems from the tone of the policy statement and tweaks (if any) to forecasts in the Monetary Policy Report. The big question is “How will the BoC spin the outlook?” and whether or not NAFTA negotiations have an impact. Whatever happens, the BoC is expected to raise rates 3 -4 times in 2018.
The US dollar ended yesterday with losses across the board. After a loopy, overnight session, it opened in New York with broad gains, except against Aussie, Kiwi and Sterling.
There wasn’t any specific reason for the FX choppiness although traders were concerned with the pace of the 2018 EURUSD rally and the ECB’s reaction to the move. There were also lingering concerns about a US government shut-down on the weekend.
In Asia, AUDUSD opened with a bid, supported by better than expected housing loans data which lifted prices from 0.7953 to 0.7997. That move was fully reversed a few hours later, and AUDUSD dropped to 0.7942 in early Europe trading. Buyers emerged, and AUDUSD opened with a small gain.
NZDUSD dipped and then rallied, in concert with AUDUSD and opened nearly unchanged..
USDJPY touched the 110.20 bottom early and then rallied to 110.92, supported by comments from BoJ Governor Kuroda that he was committed to policies to achieve 2% inflation.
The Euro had a wild ride. EURUSD shot-up to 1.2322 in Asia and then dropped to 1.2209 in early Europe trading. Profit-taking and chatter from various ECB officials weighed on the currency.
Sterling dipsy-doodled within a 1.3758-1.3834 range. Price moves tracked EURUSD with increasing Brexit chatter causing some concern for GBPUSD bulls.
WTI oil prices continued to slide after peaking at $64.87 on Monday. WTI dropped from $63.94 to open at 63.41. The move may be just profit taking as upgraded global growth forecasts, and Opec production cuts underpin prices.
The US releases Capacity Utilization and NAHB Housing starts.
Yesterday, the Dow Jones Industrial Average cracked 26,000, reaching 26,086.12 before retreating. It was a big deal when the Dow broke 25,000, a mere 13 days earlier. To put it in perspective, it took four years for the DJIA to rise from 15,00 to 20,000 and just 1 year to rise from 20,000 to 25,000. At its current pace of gains, the DJIA will be at 47,192, by year-end. A correction is long overdue.
USDCAD Technical outlook:
The USDCAD technicals are bearish while prices are below 1.2520, looking for a break below 1.2410 to test 1.2350. If broken, losses will extend to 1.2240. A break of resistance at 1.2520 followed by a move above 1.2580, would negate the downside risk a target 1.2650.
Today’s Range 1.2380-1.2480
