October 17, 2019
USDCAD open 1.3160-64 (6:00 am EDT) Overnight Range 1.3160-1.3209
UK Prime Minister Boris Johnston pulled a rabbit out of his hat and managed a new Brexit deal with the EU. GBPUSD soared on the news and dragged the rest of its G-10 peers higher, as well. Then, the rabbit died, or else became seriously ill when the DUP voiced their objections.
The US dollar closed on Wednesday with losses across the G-10 spectrum and those losses were extend as of this morning’s New York open.
FX Market Snapshot
Change in currency value against the US dollar from New York close to New York open
Traders were fixated on UK politics as Brexit stampeded towards the finish line, which was today’s EU Summit meeting. GBPUSD dipped from 1.2820 to 1.2751 just before the European open. Rumours and leaks about a pending deal lifted prices to 1.2840 until a Brexit deal was announced when it spiked to 1.2989. The rally evaporated after Irelands DUP party said the deal would drive “horses and coaches through the good Friday Agreement.” Prices plunged to 1.2751 in New York. Not only that, the UK parliament and EU 27 still need to vote on the deal.
EURUSD rallied alongside Sterling, rising to 1.1138 from 1.1066 as a Brexit deal is good for the eurozone as well. The deal should remove a significant barrier to growth although losing the UK weakens the European Union.
USDJPY traders were not asleep; it just looks that way. USDJPY bounced about in a 108.65-108.93 range and opened unchanged from Wednesday’s close. Prices are supported by the rise in 10-year Treasury yields from the overnight low of 1.727% to 1.788% in early New York trading. The currency pair got additional support from the Brexit deal inspired, improvement in risk sentiment.
Reports of further progress in the China/US trade talks underpinned the commodity bloc currencies. A Chinese spokesman said that both sides were working on the text of a deal. AUDUSD got an added lift from the unemployment report. Job gains were about as expected, but the unemployment rate declined to 5.2% from 5.3%. Prices rallied from 0.6753 to 0.6789 and then accelerated to 0.6827 on the Brexit. NZDUSD was underpinned by the Brexit induced, broad US dollar sell-off and rose to 0.6330 from 0.6280.
West Texas Intermediate (WTI) oil prices plunged to $52.79/barrel from $53.30 after API reported US crude inventories increased by 10.5 million barrels in the week ended October 11. Those losses were fully recovered after the Brexit deal announcement, but they have since dropped to $53.00 on the back of oversupply issues.
USDCAD is flirting with major support in the 1.3170 area. Yesterday, Canada CPI dropped, as expected, but the drop was reportedly because of “one-off” decline in airfares. Core inflation is steady, which further argues for domestic rates to stay unchanged on October 30. USDCAD continues to track broad US dollar moves. Prices were undermined further after August Canada Manufacturing shipments data rose 0.8% compared to the 0.6% forecast.
US data was mixed to positive. A small decline in US Housing Start was offset by a gain in building Permits., Initial Jobless claims were as expected.
USDCAD Technical View
The intraday USDCAD technicals are bearish with the move below 1.3210 looking for a break of 1.3160 to extend to 1.3130 and then 1.3000. A break above 1.3260 targets 1.3310 and then 1.3360. For today, USDCAD support is at 1.3170 and 1.3140. Resistance is 1.3210 and 1.3330. Today’s Range 1.3150-1.3230
Chart: USDCAD daily
Source: Saxo Bank