This morning’s upcoming European Central Bank (ECB) and Bank of England (BoE) policy meetings provided FX traders with the perfect excuse to sit on the sidelines, and that is what they did. The US dollar opened on a mixed note albeit, within striking distance of yesterday’s closing levels.
GBPUSD is close to unchanged despite Moody’s releasing a negative report about the UK’s prospects if there is a “no deal” Brexit. Moody’s claims the risk of a “no deal” Brexit has risen materially. Brexit would damage the UK’s economic, fiscal and institutional strength. GBPUSD traders turned a blind eye to the news and the currency traded in a narrow 1.3028-57 band. It opened this morning at the top of that range. The BoE meeting is expected to be a non-event for FX markets although Governor Carney is always a wild card.
EURUSD opened at the bottom end of its 1.1610-1.1642 range in an uneventful session. German Harmonized Index of Consumer Prices (HICP) inflation was 1.9% y/y in August. Markets do not expect much from the ECB meeting although there may be downward tweaks to
USDJPY traded with a bid tone overnight, rising from 111.18 to 111.50 and opened in New York at 111.45. The gains were supported by the news that the US wanted to restart trade talks with China and by rising US Treasury yields.
AUDUSD rallied after better than expected employment data although the gains were underwhelming and not sustained. NZDUSD traded sideways in Asia but drifted lower just before the US opened.
USDCAD is consolidating losses after yesterday’s news that Canada would offer the US concessions in its dairy supply management program. Prices found a bottom at 1.2980 yesterday and have gently drifted higher, opening at the top of the overnight range. There are reports that the concessions Canada is offering may not satisfy the Americans. Chrystia Freeland has returned to Canada, and US Trade Representative Robert Lighthizer’s attention is elsewhere. Once again, the short term technicals may be bearish, but we are just on negative headline away from a rally to 1.3150
Oil prices have retreated from yesterday’s $71.15/barrel peak and are trading at $69.50/b. The downgrade of Hurricane Florence from Category 5 potential to Category 3 triggered the selling. Profit taking was also encouraged by concerns that emerging market issues could impact global growth.
Canada New Housing Price data is due today and expected to be unchanged from July. US August CPI is forecast to tick up to 0.3% from 0.2% in July. Core CPI is projected to be unchanged at 0.2%.
USDCAD Technical Outlook
USDCAD achieved the 76.4% Fiboancci retracement target of the 1.2900-1.3225 range since August 30. If the subsequent bounce can clear resistance at 1.3025, it would suggest further gains to 1.3105. It would need to take out resistance at 1.3150 to negate the short term downtrend. For today, USDCAD support is at 1.2990 and 1.2960. Resistance is at 1.3030 and 1.3080.
Today’s Range 1.2990-1.3060