Overnight Range 1.3360-1.3424
Canada posted a 0.2% gain in August GDP and that number appealed to traders USDCAD declined to 1.3360 from 1.3404. Today’s data suggests that Q3 GDP growth will be in the 3.1% area.
It was a very busy overnight session with central bank meetings and PMI data vying for attention.
China PMI data started things off. The official NBS October Manufacturing PMI was 51.2, the same as the Caxin PMI report, beating the forecasts of 50.4 and 50.2, respectively. That data sparked a tepid risk favourable tone in markets.
The Bank of Japan policy meeting was next on the agenda. USDJPY rose to 104.96 from 104.60 and then drifted back down when the BoJ announced an “unchanged”decision, leaving itys policy rate at -0.1%. The BoJ also said it would take longer to reach its 2% inflation target.
Shortly after the BoJ, the Reserve Bank of Australia took to the podium. The RBA left rates unchanged, which wasn’t a surprise to about 70% of the market and delivered a fairly upbeat statement. That was what Aussie bulls wanted to hear and AUDUSD rose to 0.7675 from 0.7600
In Europe, Sterling saw a lot of action. GBPUSD was still basking in the glow of Bank of England Governor Mark Carney’s announcement to extend his term to 2019. GBPUSD spiked to 1.2278 from 1.2215 following the 54.3 print for the October Markit Manufacturing PMI report. That rally stalled and GBPUSD drifted back to 1.2240
EURUSD flatlined until mid-morning in Europe when it rallied from 1.0960 to just above 1.1000 in early New York trading. General US dollar weakness is behind the move.
Oil prices were steady in Asia and drifted higher in Europe, managing to climb to $47.22 from $46.60. Reuters reported that Goldman Sachs analysts were predicting a $40.00/b price if Opec fails to reach a production deal.. WTI dropped below $47.00 again.
By now, everyone and their dogs know that USDCAD is going higher. Everyone is aware that the prospect of lower oil prices, a doveish Bank of Canada and a hawkish Fed is a recipe for a Loonie soufflé.
So, who is left to buy? Arguably, all the negative Canadian dollar news is out and reflected in the price. The Finance Department’s Fall update due at the end of the day today will likely announce a bigger deficit ($30+ billion) and fast tracked infrastructure spending that may boost the Canadian economy. USDCAD is vulnerable to a move lower.
USDCAD technical outlook.
The intraday USDCAD technicals are bearish following the break below the rising channel bottom at 1.3380 which targets 1.3300 and then 1.3260 (the break out level from October 21st following weak Retail Sales and CPI data.) The 1.3425-30 area represents a triple top, reinforcing topside resistance. For today, USDCAD support is at 1.3330 and 1.3290. Resistance is at 1.33980 and 1.3420
Today’s Range 1.3310-1.3410
