Overnight Range 1.3105-1.3153
GBPUSD gapped lower overnight and hasn’t recovered. GBPUSD closed on Friday at 1.2290, opened in Asia at 1.2018 and hit a low of 1.1978, all because of weekend articles suggesting a “hard” Brexit. The Sunday Telegraph reported that Ms. May will use this week’s speech to announce that the UK would leave the EU customs union, regain full control of its borders and cease to be subject to rulings from the European court of justice. Chancellor Phillip Hammond upped the ante when he warned that the UK could be come a tax haven.
USDJPY sank from Friday’s closing level of 114.50 to a low of 113.61 before bouncing to 114.35 by mid-morning in Europe. Brexit was just one of the issues that spooked traders and led to risk aversion trades. China is talking tough and warning the US that they will “take off the gloves.” Furthermore, Mr. Trump took a shot at BMW, and its plans to build a plant in Mexico. He said he would impose aa 35% tax on cars from that country.
AUDUSD couldn’t get any benefit from a better than expected inflation report. Risk aversion sentiment drove the antipodeans lower.
Also in Asia, JPMorgan upgraded its investment recommendation for Indonesia to neutral from underweight. No one believes that JPM’s abrupt change of view had anything to do with the fact Indonesia severed all business ties with them.
The dollar opened in New York with a strong tone but well off its best levels. EURUSD close on Friday at 1.0640, gapped lower in Asia to 1.059, bounced back to fill the gap and slid steadily to the overnight low at the Toronto open.
WTI oil traded bounced within a $52.13-$52.69 range and started the Toronto session at the low. Saudi Arabia reportedly said that there was no need to extend production cuts past six months. Which may be weighing on prices.
USDCAD was ignored and traded in a narrow range shrugging off comments from Canada’s Prime Drama Teacher, Justin Trudeau that Canada needs to phase out the oil sands. He may believe that Canada can offset the negative economic impact of such a policy by royalties from his Instagram account.
It should be a very quiet day in FX markets due to the US holiday. It is Martin Luther King Day and all US financial markets are closed. Sterling traders will be listening closely to Bank of England Governors Mark Carney’s speech especially as it follows the weekend reports of a rather aggressive UK/EU Brexit negotiation. USDCAD traders will use Wednesday’s Bank of Canada policy meeting as an excuse to remain idle.
|Close 4:00 pm EDT-Open 6:00 am EST
USDCAD Technical outlook:
The intraday and short term USDCAD technicals are bearish. USDCAD is in a very steep (and therefore vulnerable) downtrend channel from the end of December peak of 1.3596 that remains intact while prices are below 1.3200. A break of support at 1.3200 would target additional support at 1.2760. A move above 1.3200 negates the downtrend and suggests further gains toward 1.3400. For today, USDCAD support is at 1.3110 and 1.3080. Resistance is at 1.3170 and 1.3205
Today’s Range 1.3110-1.3170
Chart: USDCAD 4 hour