January 22, 2020

USDCAD open (6:00 am EST)  1.3064-68   Overnight Range 1.3038-1.3090

Statistics Canada reported “The Consumer Price Index (CPI) rose 2.2% on a year-over-year basis in December, matching the increase in November. Excluding gasoline, the CPI rose 2.0%, the smallest gain since November 2018.  StatsCanada also reported “Excluding gasoline, the annual average CPI rose 2.3% in 2019, the largest increase since 2003. This increase coincided with favourable labour market conditions, including a low unemployment rate throughout 2019 and strong wage growth in the last seven months of the year.  USDCAD dropped to 1.3038 from 1.3057 on the news then bounced to 1.3048.

The US dollar opened on a mixed note with a lack of top-tier US data hindering price action but inched lower in early New York trading.

Overnight snapshot

Source:  Saxo Bank/IFXA

EURUSD stagnated in a 1.1076-1.1094 range overnight. Price action is contained by the lack of US data and distractions from Davos as well as the coronavirus scare. President Trump and Treasury Secretary Mnuchin repeated threats to slap tariffs on European car imports if the Eurozone countries impose a digital tax. The intraday technicals are bearish below 1.1125 but support at 1.1060 limits losses. A break either side is with worth about 0.0070 points. 

USDCHF strength from 0.9660 yesterday to 0.9727 overnight was rumoured to be due to Swiss National Bank intervention.  Prices have since eased to 0.9702.

GBPUSD consolidated yesterday’s employment report gains in a 1.3036-1.3067 range overnight.  Prices accelerated to 1.3135 after CBI Industrial Trends Survey data was stronger than forecast.  Today’s CBI and yesterday’s  employment report knocked Bank of England rate cut odds to 53% from 60.0%.

USDJPY traded firmer in Asia, rising from 109.84 to 110.08 where the rally stalled. Prices dipped to 109.94 in New York trading, undermined by a drop in US 10-year Treasury yields from 1.806% to 1.769%

AUDUSD and NZDUSD suffered early from coronavirus fears with Aussie seeing additional pain when Westpac’s consumer confidence index was weaker than expected. Both currency pairs recouped their losses and opened in New York unchanged from yesterday’s close.

Oil prices slid from $58.67/barrel at Monday’s close to $57.82 overnight. Traders are ignoring Libya’s export problems as global crude inventories remain high.

USDCAD rallied alongside antipodean losses in Asia, but the entire move reversed, and the Loonie opened with a tiny gain. The Bank of Canada is universally expected to leave interest rates unchanged today. The risk comes from fears of a less dovish than expected statement and the quarterly Monetary Policy Report. Previously, there was a downside tilt to the outlook from trade tensions. The signing of the Phase 1 US/China trade deal must have levelled out those risk. The CPI data forecast predicts inflation to be on target.

The US economic reports include the November Housing Price Index and December Existing Home Sales.

USDCAD Technical Outlook

The intraday technicals are unchanged. The failure of USDCAD to break above resistance in the 1.3090-1.3110 area, and its retreat to 1.3064 keeps the 1.3030-1.3090 range intact. Today’s BoC MPR and Poloz press conference will determine if support at 1.3030 or resistance at 1.3090 breaks. A move above 1.3110 targets 1.3180 while a break of 1.3030 shifts the focus to 1.2950. Today’s Range 1.2990-1.3090

Chart: USDCAD 4 hour

Source: Saxo Bank