June 28, 2019

USDCAD Open (6:00 am EDT) 1.3093-96      Overnight Range 1.3074-1.3095

Canada’s April GDP surprised to the upside.  Statistics Canada reported that “Real gross domestic product was up 0.3% in April, following a 0.5% increase in March. Goods-producing industries rose 0.4%, while services producing industries increased 0.2%. The 20 industrial sectors were nearly evenly split between gains and losses.
Real gross domestic product increases in April

Source:  Statistics Canada

On a three-month rolling average basis, real gross domestic product increased 0.3%, up compared with the three-month rolling average in March (+0.1%).

Industrial Product prices were marginally higher, while Raw Material prices were down 2.3% after five straight monthly increases.

USDCAD dropped to 1.3074 from, 1.3090 on the news but quickly recovered, in part due reports of a large 1.3090 option expiry at the 10: am, New York cut, today.

Today’s US PCE data did not have any impact on FX markets.

The Trump Circus act is in Osaka, Japan. The G-20 Summit meeting is usually a dull affair for financial markets.  Traders mostly note the battalions of security forces exercising “truncheon diplomacy” as the ensure the ruling elite are separated from the great unwashed.  It all changed when President Trump attended his first meeting.  It became the “Trump Circus.”  The G-20 agenda is whatever is irking “the Donald” currently, regardless of what the hosts planned.

The Osaka meeting is no different.  Markets are fixated on outcomes from Trump meetings with China President Xi Jinping, Russia President Putin, and India Prime Minister Modi.

FX markets were on hold in a tranquil overnight session. New York traders are on alert for reportedly large scale US dollar selling due to month-end, quarter-end and ½ year-end portfolio rebalancing.  However, it should be noted that if the reported flows substantial, the US dollar would have opened on a much weaker footing.

The US dollar is closing the quarter in a decidedly mixed fashion.  The Japanese yen is the best performing currency with a gain of 2.88% compared to the March 29 close.  That was mostly due to increased risk aversion and plunging US Treasury yields.  Sterling was the biggest loser, shedding 2.73% due to Brexit woes.

The Canadian dollar was a ray of sunshine, gaining 1.9%, fueled, in part, by surging oil prices.

Overnight, EURUSD climbed from 1.1362 to 1.1392, supported by an unexpected bump in core inflation to 1.1% y/y from0.8% in May.  Headline HICP inflation was unchanged at 1.2%.

GBPUSD drifted sideways in a 1.2667-1.2685 range.  Traders ignored Uk Q1 GDP data, which was unchanged at 0.5%.

USDJPY traded with a negative bias in a 107.57—107.82 range, weighed down by softer US Treasury yields.

The Bank of Canada Business Outlook Survey is due at 10:00 am EDT.  The Canadian dollar came under pressure when the previous survey was released (April 15, 2019) when Business sentiment deteriorated.  Today’s report may show a similar result because US/China trade tensions escalated during the survey period.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish.  The move below 1.3120 yesterday, suggests a short term top is in place at 1.3340.  A break below 1.3080 targets 1.2990.  A move above 1.3180 would argue for further gains to 1.3340.  Today’s range 1.3040-1.3120

Chart: USDCAD  4 hour