April 17, 2019

USDCAD Open (6:00 am EDT) 1.3323-26:  Overnight Range 1.3280-1.3371

Everything is coming up roses for the Canadian dollar and it is strutting it’s stuff.  Global risk sentiment improved and so did Canadian economic data.  Canada March inflation rose 1.9% y/y,  as expected but far better than February’s 1.5% result.  Even better, Core CPI was higher-than-expected, rising 1.6% rather than the 1.3% forecast. The icing on the cake came from a marked reduction in Canada’s trade deficit to $2.9 billion.  The January trade deficit was revised down to $3.09 billion from $4.20 billion. USDCAD collapsed on the news, dropping from 1.3340 to 1.3277.

China released forecast-beating data and sparked a “risk-on” rally.  Asia and European equities rose while US equity futures point to a higher open on Wall Street.  Oil and other commodity prices climbed, but the US dollar opened in New York on a mixed note.   EUR, USD and CAD are higher, GBP, CHF and NZD are lower, and JPY is unchanged.

Kiwi got crushed at the Asia open. NZDUSD plunged from 0.6774 to 0.6670 when Q1 inflation data was worse than expected. (Actual 1.5% vs forecast 1.7% and previous 1.9%, y/y).  Economists think inflation could fall further which would lead to another cut in the OCR rate.  NZDUSD recouped ½ of its losses by the New York open and AUDUSD soared to 0.7204 from 0.7154 following the China data.

USDJPY’s upside was tempered by the start of the US and Japan trade talks. Prices held to a narrow 111.93-112.15 range, supported by firmer US Treasury yields and the improvement in global risk sentiment.

EURUSD has drifted off its 1.1322 overnight peak after Germany slashed its 2019 GDP growth forecast to 0.5% from 1.0%.  Officials believe that although they guessed wrong with their 2019 forecasts, the markets will believe their 2020 guess is a valid number.  There is some speculation that the Swiss National Bank demand for EURCHF may be underpinning the single currency.

GBPUSD bounced inside a 1.3034-65 range, rising in Asia and then falling in Europe after weaker than expected UK data. UK CPI, PPI DCLG Home Price Index and Retail Prices Index were all below forecasts.

Oil price got a lift from the China data and the American Petroleum Institute’s report of a 3.09 million barrel drop in US crude inventories in the week ending April 12. WTI oil rose from $63.90/b to $64.58/b and opened in New York at $64.41/b

USDCAD Technical Outlook

The intreaday USDCAD technicals turned bearish (again) with the move below the 1.3340-60 area which sets up a probe of resistance at 1.3305  Fiboancci retracement levels of the February/March range suggest a break of 1.3316 will lead to a test of  1.3270 and then 1.3228. The move below the 100 day moving average (1.3333) targets the 200 day moving average at 1.3203 which is just below long-term uptrend support at 1.3324. For today, support is at 1.3305 and 1.3270. Resistance is at 1.3360 and 1.3400.

Today’s Range 1.3270-1.3340.