October 16, 2019

USDCAD open 1.3209-13 (6:00 am EDT)     Overnight Range 1.3197-1.3222

FX was in motion around the release of Canada inflation, US Retail Sales, and fresh rumours about Brexit. Brexit trumped it all. The net result, after fifteen minutes from the data dump, was that the FX majors were little changed from this morning’s New York open, except for GBPUSD, which was higher.

FX Market Snapshot

Change in currency value against the US dollar from New York close to New York open 

GBPUSD soared to 1.2840 from 1.2730 after two senior EU “sources” said the DUP accepted the latest proposals.” That was after a “bouncy-bouncy” overnight session as Brexit news and rumours drove GBPUSD traders batty, and prices chopped about in a 1.2604 and 1.2697 range. Talk of an extension to the October 31 deadline and another EU Summit has fueled GBPUSD gains. Traders ignored a slew of UK economic data which included: September CPI (Actual 1.7% y/y vs forecast 1.8%) and September Retail Price Index (Actual 2.4% y/y vs forecast 2.6%)

EURUSD rallied alongside GBPUSD, but its gains were small and capped by resistance at 1.1060. Eurozone September CPI rose 0.8% y/y compared to the forecast of a 0.9% increase which won’t do anything to alter the ECB’s dovish monetary policy stance.

US September Retail Sales fell 0.3% compared to the forecast for a 0.3% gain. The US dollar dropped on the news, but its losses were shallow, and it started to recover.

USDJPY held on to yesterday’s gains and traded in a 108.60-108.86 range. The gains were underpinned by the steep rise in US Treasury yields which were boosted by the improved prospects for a Brexit deal. 10-year US Treasury yields climbed to 1.775% from 1.685% yesterday. Prices inched lower to 1.724% in early New York trading which capped USDJPY.

AUDUSD and NZDUSD were under pressure for most of the overnight session. NZDUSD traders ignored a tick higher in inflation rates (Q3 CPI 0.7% q/q vs forecast 0.6%) in part because they still expect further monetary easing by the RBNZ. AUDUSD is weighed down by the lack of concrete details from the US/China trade talks, phase 1. So far, the US still plans to levy tariffs if there isn’t a deal by the end of the year and existing tariffs remain in place. China said it planned to increase purchases of US agricultural products but didn’t say when.

Oil prices are depressed by ongoing global growth concerns and expectations of rising US crude inventories. 

USDCAD bounced between 1.3197 and 1.3233 immediately following the Canadian and US data. Canada September CPI dropped 0.4%m/m, worse than the -0.2% that was expected. The negative sentiment was tempered by Core CPI remaining unchanged at 1.9%y/y. The mix of weak Canadian inflation data and soft US Retail Sales numbers suggest further USDCAD consolidation in a 1.3180-1.3250 range.

USDCAD Technical View

The intraday USDCAD technicals are unchanged from yesterday.  They continue to have a short-term negative bias. while prices are below 1.3250 but losses have been contained in the 1.3180-1.3205 support zone.  A break below 1.3180 opens the door to 1.3000 while a break above 1.3330 targets 1.3530.  For today USDCAD support is 1.3200, 1.3180 and 1.3140. Resistance is 1.3240 and 1.3290.  Today’s Range 1.3180-1.3260

Chart: USDCAD 4 hour

Source: Saxo Bank