It’s a cold Monday, weather-wise and in FX markets. The US dollar finished the week on a down note, posting losses against all the G-10 majors, Friday to Friday, led by a 2.55% gain in GBPUSD. Hopes that a “no-deal” Brexit would be avoided boosted Sterling, while an improved risk tone due to equity market gains and the pending China/US trade talks.
AUD & NZD
News of the temporary reopening of the US government gave AUDUSD and NZDUSD a lift in early Asia trading, but AUDUSD couldn’t hang on to the gains and opened unchanged in New York. The fact that Australia was closed for a holiday may have been a factor. NZDUSD is modestly higher, compared to Friday’s close.
The rest of the G-10 majors are straddling Friday’s closing levels. Traders are “keeping their powder dry” ahead of the China/US trade talks that start today and Wednesday’s FOMC meeting. Markets expected the FOMC to reaffirm that they are taking a break from raising interest rates, but Fed Chair Powell’s press conference is a wild card. He appeared to go off-script at the December 21 meeting and then reversed himself two week’s later. That has put a dent in his credibility.
The UK Parliament votes on Theresa May’s Brexit Plan B on Tuesday. There are a number of amendments being voted on including one that seeks to extend the deadline from March 29. GBPUSD dropped from 1.3210 to 1.3152 in a profit-taking move.
EURUSD traded sideways in a 1.1391-1.1424 range. Last week’s dovish ECB meeting and EURGBP selling is being somewhat offset by EURUSD demand from expectations that the FOMC will confirm that additional US rate increases are on hold. The China/US talks are also undermining the single currency.
USDJPY is in the middle of its 109.00-109.90 range consolidative range. Prices are torn between hopes for a dovish Fed and risk aversion fears if China/US trade talks fail.
Oil prices plunged. WTI dropped from Friday’s peak of $53.80 to $52.53/barrel in Europe. Traders were spooked after the Baker Hughs data showed an increase in the weekly rig count to 862 from 852 the previous week.
USDCAD traders shrugged off the oil price drop and the currency pair easily held on to Friday’s losses. The currency is tracking broad US dollar moves, and there isn’t any significant domestic data available until Thursday’s GDP report..
The intraday USDCAD technicals turned bearish on Friday with the break of the minor uptrend line from January 11. The overnight move below 1.3228 (76.4% Fibonacci retracement level of Jan11-24 range) puts a 100% retracement in place, which is at 1.3180. The longer term uptrend line from September comes into play at 1.3200. For today, USDCAD support is at 1.3200 and 1.3180 Resistance is at 1.3260, 1.3280 and 1.3310
Today’s Range 1.3200-1.3260