October 22, 2019
USDCAD open 1.3080-84 (6:00 am EDT) Overnight Range 1.3073-1.3121
Canadian Retail Sales slumped in August, and the Loonie sank on the news. USDCAD traded quietly in a 1.3073-1.3091 range until Toronto opened when prices inched higher to 1.3100. News that August Retail Sales fell 0.1% rather than rise 0.4% as expected boosted prices to 1.3121. The USDCAD was assisted by broad US dollar gains against the majors
The US dollar closed yesterday with tiny gains and opened this morning on a mixed note before US dollar demand re-asserted itself in Toronto trading.
FX Market Snapshot
Change in currency value against the US dollar from New York close to New York open
The Canadian election didn’t help or hurt the currency-yet. Canada has a minority government. Justin Trudeau’s Liberal Party won 157 seats, 27 less than in 2015 and not enough for a majority government. The NDP (and likely Liberal partner) won just 24 seats compared to 44 in 2015. The Bloc Quebecois won 32 seats, an increase of 22 and will be the tack on Trudeau’s chair. The combination of NDP spending plans and Trudeau’s assertion that “budgets balance themselves” suggest that Canadian voters rejected any semblance of fiscal responsibility for the government.
USDCAD traders did not react to the news. However, the Loonie is vulnerable. Liberal climate change initiatives will raise corporate and personal taxes which will put the brakes to domestic growth. Meanwhile, Liberal/NDP spending plans will lead to a ballooning government deficit, and global investors will flee. If only Canadian politics were as simple as the UK example. 😊
GBPUSD traded in a 1.2923-88 range overnight but found fresh selling interest when the UK parliament began discussions on PM Johnson’s Withdrawal Agreement Bill ahead of a vote to limit debate to just three days. Prices dipped to 1.2888 before recovering above 1.2900.
EURUSD tracked GBPUSD moves but drifted down to 1.1124 alongside the softer GBPUSD profile. There wasn’t any actionable economic data. News the EU demanded clarification from France and Italy about their budget plans was ignored.
The Asia session saw a mild shift to risk-seeking, which followed yesterday’s US/China trade talks developments. President Trump said the talks were going well and another official said that they were hoping for a deal before the APEC summit in November. USDJPY rose as did AUDUSD and NZDUSD.
The Bank of Canada Business Outlook Survey is released this US data includes Existing Home Sales.
The Bank of Canada Business Outlook Survey is released today. US data includes Existing Home Sales.
USDCAD Technical View
The intraday USDCAD technicals are bearish below 1.3170, supported by the break below 1.3130 and looking for a decisive breach of support in the 1.3070-80 area. Below this level opens the door to a test of 1.3005 and 1.2950. A break above resistance at 1.3130 would shift the focus to 1.3180 which if broke would target 1.3240. For today, USDCAD support is at 1.3080 and 1.3040. Resistance is 1.3130 and 1.3180. Today’s Range 1.3070-1.3140
Chart: USDCAD 4 hour
Source: Saxo Bank