June 19, 2019
USDCAD Open (6:00 EDT) 1.3377-81 Overnight Range 1.3340-1.3381
The Bank of Canada’s low inflation worries took a turn for the better. May CPI rose 2.4% y/y, well above the forecast of a 2.0% increase and the Loonie soared on the news. USDCAD dropped to 1.3340 from 1.3377. Prior to the data the currency pair was already under pressure. It dropped from 1.3428 yesterday to 1.3368 in Asia, undermined by the WTI oil price rally and the prospect that China and the US resume trade discussions. Lingering hopes for a dovish FOMC statement and the possibility of a US rate cut also weighed on prices. However, USDCAD will likely hold support at 1.3340 until this afternoons FOMC meeting.
President Trump was at his dung-disturbing best yesterday. If his goal was to weaken the US dollar; it worked, albeit modestly. He failed to deny his administration contemplated demoting Fed Chair Jerome Powell, last February. Instead, when asked his plans he said “Lets see what he does,” in reference to today’s FOMC meeting.
ECB President Mario Draghi’s dovish comments about weak Eurozone growth and inflation incurred Trump’s twitter wrath. He tweeted “Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.” He didn’t stop there adding ““ECB officials see Rate Cut as primary tool for any new stimulus.” @business” and “German DAX way up due to stimulus remarks from Mario Draghi. Very unfair to the United States!”
President Trump was at his dung-disturbing best yesterday. If his goal was to weaken the US dollar; it worked, albeit modestly. He failed to deny his administration contemplated demoting Fed Chair Jerome Powell, last February. Instead, when asked his plans he said “Lets see what he does,” in reference to today’s FOMC meeting. ECB President Mario Draghi’s dovish comments about weak Eurozone growth and inflation incurred Trump’s twitter wrath. He tweeted “Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.” He didn’t stop there adding ““ECB officials see Rate Cut as primary tool for any new stimulus.” @business” and “German DAX way up due to stimulus remarks from Mario Draghi. Very unfair to the United States!”F
X traders sold EURUSD after Draghi’s speech and then bought some of them back overnight although that move may be merely position adjusting ahead of today’s FOMC meeting. Some market analysts expect dovish tweaks to the statement rather than a blatant signal of a rate cut in July. Other analysts do not expect much change ahead of Trump/Jinping trade talks at the G-20 meeting. Nevertheless, the odds for a July rate cut are at 64.7%.
News of those talks invigorated commodity bloc currency bulls. AUDUSD and NZDUSD bounced off recent lows. NZDUSD got an added boost from a $675.0 million rise in the current account surplus for Q1.
Sterling continued to rebound from yesterday’s 1.2505 low and touched 1.2585 after UK inflation and PPI data. However, traders are reluctant to extend the rally in the face of the Conservative party leadership race, which suggests Boris Johnson will be the next UK Prime Minister.
WTI oil prices soared 4.1% yesterday. Traders were encouraged by the prospect that US/China trade talks would restart at the end of the month. Yesterday, the American Petroleum Institute said weekly crude inventories dipped by 0.812 million barrels. Opec announced meetings on July 1-2.
USDCAD Technical Outlook
The intraday USDCAD technicals flipped to a modestly bearish bias with yesterday’s break below minor support a 1.3390. Further losses below support in the 1.3340 area will target 1.3290 and 1.3240. A break above 1.3430, targets 1.3480 then 1.3520. Today’s Range 1.3290-1.3390
