September 19, 2019

USDCAD Open (6:00 am EDT) 1.3285-89         Overnight Range 1.3281-1.3305

It was central bank meeting bonanza, today. The Bank of Japan, Bank of England, Swiss National Bank and Norges Bank (Norway) had policy meetings and there was a rate hike in the mix.

The Fed meeting is over but is it done?  The Fed cut interest rates by 0.25% yesterday and released a “dot-plot” forecast that suggests they are done cutting rates until the end of next year.  FX markets are not putting much weight on the dot-plots as they have proved to be something less than useless since last year.

The US dollar closed yesterday with small gains across the G-10 spectrum and opened today with small losses, except against the antipodean currencies.

FX Market Snapshot

Change in Currency value vs the US dollar-   NY close to NY open

The latest Organization for Economic Cooperation and Development and Development (OECD) report cut the global growth forecast for 2019 from 3.2% to 2.9% with escalating trade tensions as a key reason for the move.

EURUSD recovered all of yesterday’s post-FOMC losses overnight. Prices rose from 1.1024 in Asia to 1.1067 as traders mulled over the implications of a Fed in park, for the foreseeable future.  The single currency also got a boost when Norges Bank (Norway Central Bank) raised interest rates by 0.25% to 1.5%. The Swiss National Bank (SNB) left its benchmark rates unchanged but reduced the penalty Banks pay for excess reserves. USDCHF jumped to 0.9952 from 0.9917 on the news.

GBPUSD chopped about in a 1.2454-1.2498 range with traders awaiting the Supreme court decision on the legality of Boris Johnston proroguing parliament.  Traders ignored weaker than expected UK August Retail Sales data (Actual -0.2% m/m vs forecast 0.0%) while biding their time until the Bank of England (BoE) policy decision.  The BoE left rates unchanged, but warned “The longer those uncertainties persist, particularly in an environment of weaker global growth, the more likely it is that demand growth will remain below potential, increasing excess supply. In such an eventuality, domestically generated inflationary pressures would be reduced.”  The OECD added their two-cents worth saying a “no-deal” Brexit would knock 3% off UK growth.

In Asia, the Bank of Japan left monetary policy unchanged. However, the chances for easier monetary policy in October increased. Governor Haruhiko Kuroda warned “We are more eager to act given heightening global risks. We will scrutinize economic and price developments thoroughly at next month’s meeting to decide whether to ease.” USDJPY dropped from 108.46 to 107.79 before recovering in Europe.

AUDUSD suffered a double whammy. The Fed’s dot-plot forecast knocked AUDUSD from 0.6855 to 0.6815, and then weak Australia employment report sent it tumbling again. Prices touched 0.6782, and they opened in New York, just above the low. NZDUSD traded with a negative bias due to the US interest rate outlook.

USDCAD ignored yesterday’s inflation data and tracked broad US dollar moves inside its well defined 1.3140-1.3380 trading band.

Today’s US data dump includes Initial Jobless Claims, Existing Home Sales, Current Account, and Philadelphia Fed Manufacturing Survey. The Canadian calendar is empty.

USDCAD Technical View

USDCAD continues to trade with a modestly bullish bias but lacking the momentum to break out of the well-entrenched 1.3140-1.3380 range.  That band has contained price action since July 23. A topside break targets 1.3660 while a downside break suggests a visit to 1.2750.  For today, USDCAD support is at 1.3260 and 1.3230.  Resistance is at 1.3310 and 1.3340. Today’s range 1.3240-1.3340

Chart: USDCAD 1 hour

Source: Saxo Bank