USDCAD has firmly and decisively cracked the 1.3000-1.3015 resistance level which should not become support. The break hangs a target on the 1.3200 level which was where USDCAD was trading on June 27, 2017. That’s the day Bank of Canada Deputy Governor announced a hawkish shift to the BoC, leading to the July 12 rate hike. That day, USDCAD plunged from 1.3200 to 1.3015.
There are a few catalysts for this week’s USDCAD rally. They include the appearance of White House turmoil and dysfunction, rumours of Trump announcing new tariffs on China technology and consumer goods and concerns that the NAFTA talks aren’t going very well. Mexico’s Economics Minister did not help the situation when he suggested bilateral talks for Canada and Mexico.
AUDUSD and NZDUSD have also been crushed, this week. Weaker than expected economic data, soft commodity prices and expectations that the antipodean central bank interest rate policies will lag that of the Fed.
USDJPY was battered overnight, falling from 106.36 to 105.65 on renewed risk aversion concerns. The Washington Post reported that President Trump’s National Security Advisor H. R. McMaster is on his way out.
EURUSD traded sideways in Asia and ticked higher in Europe supported by pre-weekend profit-taking. ECB Chief Economist Peter Praet said that the central bank was “not in a hurry to change guidance” which helped to cap the topside.
Sterling rallied in Europe, rising from 1.3914 to 1.3979. Traders do not seem concerned with comments from the Bank of England warning of “material risks” from Brexit.
WTI oil prices are in the top half of this week’s $60.10-$62.30 range. Traders are still undecided about what impact rising US supply will have on prices if global demand continues to increase as Opec and IEA forecast.
Today’s US data, (Housing Starts, Building Permits, Capacity Utilization, Industrial Production, JOLTS and Michigan Consumer Sentiment) are second tier. However, firm or better than expected data will underpin the US dollar ahead of next weeks FOMC meeting.
The Canadian data is unlikely to stem the bearish outlook for the Loonie.
USDCAD Technical Outlook
The USDCAD techncials are bullish supported by the break above 1.3015 and then 1.3040 which targets further gains to 1.3200, although the 1.3132 (61.8% Fibonacci retracement of 1.2065-1.3795 range) will slow the rally. For today, USDCAD support is at 1.3050 and 1.3015. Resistance is at 1.3130 and 1.3200
Today’s Range: 1.3040-1.3130