August 29, 2019

USDCAD Open (6:00 am EDT) 1.3280-83        Overnight Range 1.3275-1.3317

FX risk sentiment turned slightly positive in Europe after a somewhat subdued Asia session. China Ministry of Commerce spokesperson Gao Feng said China would not immediately react to the American tariffs that start on Sunday. He said the focus should be on removing the new tariffs to prevent an escalation in the trade war.

 The Commodity currency bloc rallied as did oil prices.  EUR, JPY, CHF, and Bitcoin (BTCUSD) slid as did gold prices.  An improvement in China/US trade talks was not surprising.  that suggests the rally may have had more to do with position adjusting ahead of major US and Eurozone data releases today and Friday.

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

This morning’s slew of US economic data reports were greeted with a collective yawn.  Q2 GDP was as expected at 2.0% y/y and US Jobless Claims were as forecast. Canada’s Current Account deficit narrowed from -$16.6 billion to -$6.3 Billion.

 EURUSD traded with a negative bias in a narrow 1.1071-1.1086 range. Eurozone sentiment data was mixed. August Consumer confidence was -7.1, as expected but weaker than the July result. Economic sentiment was a touch higher at 103.1, and Industrial confidence was soft but beat forecasts. The more significant data releases, Eurozone employment and inflation, are due tomorrow.

 GBPUSD traded calmly compared to yesterday. Prices consolidated Wednesday’s losses in a 1.2184-1.2220 band with traders trying to determine if all the bad news is priced into the currency.  Probably not. “Happily ever after” is only in fairy tales and Boris is not Snow White.

 USDJPY rallied from 105.84 to 106.35, on the back of the China news. Traders content to be short USDJPY on the back of US 2yr/10yr yield curve inversion found themselves getting squeezed.

 NZDUSD suffered in Asia after Business Confidence and Activity Outlook data were weaker than expected. Prices dropped from 0.6345 to 0.6308, but the bulk of those losses were recouped following the China trade news.  AUDUSD traded similarly.

 Oil prices traded in a $55.46/barrel $56.18/b range. Shrinking US crude inventories underpin prices.  Yesterday’s EIA crude stocks weekly showed weekly crude stocks down 10.02 million barrels. Hopes for a renewed US/China trade dialogue also supported prices.

USDCAD dropped alongside the commodity bloc currencies but remains stuck in its well-defined 1.3240-1.3340 range. That could change on Friday, depending upon the outcome of Canada June GDP, Industrial Product Prices and Raw Material Price data

USDCAD Technical Outlook

USDCAD continues to chop about inside a 1.3240-1.3340 band.  The intraday technicals are modestly bearish while prices are below  1.3290, looking for a re-test of support at 1.3240.  A move above 1.3290 targets 1.3340.  Longer term,  a decisive break above  the 1.3340-1.3380 area targets 1.3550. A break below 1.3230 targets  1.3000.  For today, USDCAD support  is at 1.3240 and 1.3210.  Resistance is at 1.3310 and 1.3340. Today’s Range 1.3240-1.3310

Chart: USDCAD 1 hour