November 5, 2019

USDCAD open 1.3118-22 (6:00 am EST)    Overnight Range 1.3117-1.3160

US Trade Balance data forecasts for a 52.5 billion deficit were right on the money, The Canadian data was slightly softer but a non-factor for USDCAD traders.

The Commodity bloc currencies surged higher on an improved tone to risk sentiment.  The Financial Times reported the US was considering rolling back the 15% tariffs on $112 billion of Chinese imports that were levied September 1.  The US dollar is a tad firmer against JPY, CHF and EUR but down against the rest of the G-10 majors at today’s New York open.

FX Market Snapshot Daily

Change in currency value against the US dollar from NY close to NY open

Wall Street closed with record highs, which led to Asia equity indices closing on a positive note and that helped underpin the antipodean currencies. AUDUSD traders ignored mixed Services and Composite PMI data reports and focused on the RBA meeting. The central bank left rates unchanged and delivered a somewhat dovish monetary policy statement. Both were expected and priced into AUDUSD, which rallied to 0.6926 from 0.6878. NZDUSD tracked AUDUSD higher, boosted by improved China/US trade sentiment. However, prices in both currency pairs retreated in early NY trading.

USDJPY rose alongside rising Treasury yields climbing to 108.85 from 108.57. The apparent thaw in previous acrimonious US/China trade negotiations with the suggestion that repealing tariffs would pave the way towards a Phase 1 deal, sent Treasury yields soaring. The US 10-year Treasury yield climbed from 1.751% yesterday to 1.812% at today’s New York open.

EURUSD traders were not overly impressed by the US/China trade story, today’s Eurozone PPI data, or new ECB President Christine Lagarde’s speech yesterday. Lagarde’s speech was a non-event as it didn’t touch on monetary policy. September PPI was as expected, but weaker than August’s result. The trade story wasn’t enough to generate volatility and EURUSD drifted in a 1.1114-1.1139 range.

GBPUSD fell to 1.2878 yesterday, on profit-taking during the UK parliament vote for a new Commons Speaker. Sir Lindsay Hoyle won it. General US dollar weakness lifted GBPUSD to its session peak of 1.2907 in NY trading.

Oil prices are on a tear thanks to rising hopes of a US/China trade deal. WTI oil prices rose from $53.60/barrel on October 31 to $57.33 yesterday. They opened today at $57.08/b. 

The oil price rally isn’t eroding support for USDCAD in any meaningful way. That may be due to the $22.25/b discount for Western Canada Select (WCS), Alberta’s benchmark crude export, which has deepened following a TC Energy pipeline leak. USDCAD is also supported by rising risks that the BoC follows the Fed and cuts interest rates, as early as January 2020. The currency pair drifted down to 1.3118 from 1.3159 overnight but bounced up to 1.3130 in early trading.

Today’s trading focus will continue to be US/China trade news and Wall Street performance.

 USDCAD Technical View

The intraday USDCAD technicals are modestly bearish having snapped the uptrend line from October 29 with the move below 1.3145. A break below 1.3120 points to further weakness to 1.3040-60 zone. A break above 1.3180 will negate the bearish sentiment and shift the focus to 1.3240 and then 1.3330. For today, USDCAD support is at 1.3120 and 1.3090. Resistance is 1.3180 and 1.3220. Today’s Range 1.3110-1.3170

Chart: USDCAD 1 hour

Source: Saxo Bank