July 19, 2019

USDCAD open (6:00 am EDT) 1.3039-42           Overnight Range: 1.3018-1.3105

Disappointing Canadian Retail Sales data blasted USDCAD through the top of this week’s range, this morning. Statistics Canada reported that “Retail sales declined for the first time in four months, edging down 0.1% to $51.5 billion in May. Excluding sales at motor vehicle and parts dealers and gasoline stations, retail sales decreased 1.0%.  Sales were down in 4 of 11 subsectors, representing 39% of retail trade.  Lower sales at food and beverage stores were the main contributors to the decline.” Traders were expecting a 0.3% increase.

The US dollar shrugged off yesterday’s rate cut drama and is closing the week on a mixed note compared to Monday’s opening levels.  CAD, EUR, GBP, and CHF are down while AUD and NZD are higher.  The Japanese yen is unchanged. Asia traders walked in to find the US dollar weaker across the G-10 spectrum.  Markets were getting lathered up about the likelihood of a larger than expected rate cut on July 31, thanks to comments by New York Fed President John Bullard, earlier. He appeared to be advocating for a 50 bp rate cut at the July meeting.  “It’s better to take preventative measures than to wait for disaster to unfold,” he said.  Traders took that statement to mean he favoured a 50 basis point cut as a 25 bp cut is 100% priced in. A few hours later a spokesman from the New York Federal Reserve said markets misunderstood the speech.  “This was an academic speech on 20 years of research.  It was not about potential policy actions at the upcoming FOMC meeting,” 

The USD dollar tanked during the New York afternoon and opened in Asia with losses across the G-10 spectrum.  However, the greenback recovered in Asia, following the NY Fed’s clarification.

USDJPY rallied from 107.23 at the open to 107.60 in early New York trading today. The gains were supported by a rebound in US Treasury yields and a 2.0% rally in the Nikkei 225. Japan CPI was as expected and ignored by FX traders. The Antipodean currencies are trading just below their peak levels for this week.

In Europe, EURUSD dropped from 1.1265 to 1.1237, in part because of weaker than expected German PPI data. June PPI fell 0.4%, compared to -0.1% in May.  There are reportedly $1.8 billion of options expiring today with strikes in the 1.1225-60 area, which may limit price action.

GBPUSD dropped from 1.2555 to 1.2512 in Asia and Europe, then started climbing just before New York opened. The rally from 1.2387 on Tuesday stalled at the 1.2555-60 resistance area. A move below 1.2510 targets 1.2460. “No-deal” Brexit fears and the Tory leadership campaign should limit topside moves.

Gold prices soared on increased Middle East tensions. President Trump confirmed that the US shot down an Iranian drone over the Strait of Hormuz. Iran said they hadn’t lost any drones.  XAUUSD rose from $1,416.00/oz to $1,452.79/oz. Oil traders were less impressed WTI climbed to $56.33 from $55.65/barrel

The only US data of note is Michigan Consumer Sentiment which is expected to rise to 98.5 from 98.2.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish while prices are below 1.3110, however the rally above 1.3060 suggests there is an upside bias.   A break above 1.3110, suggests further gains to 1.3220.  A break below 1.3020 targets 1.2990 then 1.2960.  For today, USDCAD support is at 1.3040 and 1.3020  Resistance is at 1.3110 and 1.3150.  Today’s Range 1.3040-1.3110

Chart: USDCAD 4 hour