USDCAD Overnight Range 1.2897-1.3041                

Risk aversion sentiment reared its ugly head again in overnight markets. It didn’t help that both the Fed and Bank of Japan were harping about Brexit risks.  The Fed said that Brexit concerns were one of the reasons for leaving rates unchanged (being gun-shy wasn’t mentioned) while BoJ governor Kuroda said that the BoJ stands ready to work with other central banks to smooth market volatility if the “leave” side prevails.

Those BoJ comments and a lack of policy action despite a strong yen and a soft economy crushed USDJPY, sending it down from 105.64 to 103.54.  It bounced in Europe and opened in New York at 104.23.  Elsewhere, New Zealand Q1 GDP surpassed expectations and punted NZDUSD through the uprights All those gains were erased during the European session and NZDUSD is back where it was before the data. Australian employment data (Actual 18,000 vs forecast 15,000) wasn’t really all that impressive as most of the gains were in part time jobs. AUDUSD declined steadily throughout the session.

Yesterday, the FOMC left interest rates unchanged yesterday and then downgraded GDP forecasts and pared back rate increase forecast in the coming years. So much for “appropriate to raise rates in coming months” which is what Fed Chair Yellen was spouting just a few weeks ago.  The FX reaction wasn’t terrible or swift, merely mechanical.  The US dollar declined against the G10 currencies except for the Canadian dollar.  The Loonie was dealing with fall-out from what was viewed as a disappointing EIA Crude Stocks report.

USDCAD is starting the New York session with a solid bid which is due to risk aversion US dollar demand and falling oil prices. The WTI uptrend that has been in place since the middle of February was broken on the move below $48.05 which has opened the door to a test of support at $45.60. Short term supply imbalances are still the main driver of WTI prices. WTI is currently sitting at $47.05 which keeps the focus on the May 2016 peak. The Bank of Canada has downgraded its forecast for the hit to the Canadian economy from the Alberta fires. In a speech in the Yukon on Wednesday, Governor Poloz reduced the expected impact to Q2 GDP from 1.25% to 1.00%.

This mornings US data results were on the soft side of the equation.  Jobless Claims rose while May CPI dipped and missed the forecasts.

USDCAD technical outlook

The intraday technicals are bullish above 1.2940 looking for a break of 1.3040 to extend gains to 1.3155-1.320 area representing resistance from prior tops and the 100 day moving average (currently 1.3157).  The intraday technical studies suggest that USDCAD is over-bought and vulnerable to a minor correction. A move below 1.2930 would alleviate the top-side pressure and extend losses to 1.2870.  For today, USDCAD support is at 1.2990, 1.2970 and 1.2940.  Resistance is at 1.3040, 1.3070 and 1.3110.

Today’s Range 1.2990-1.3090

Chart USDCAD 1 hour.

cad 16th