A brief headline that read “Lawmakers agree in principle to fund border” sparked somewhat of a “risk-on” rally in Asia. The Senate and House will provide $1.375 billion for 55 miles of fencing in a deal that hopes to prevent a government shutdown on Friday. It is only a fraction of the $5 billion demanded by President Trump, and he is the “principal” that still has to agree, which suggests this risk rally could be short-lived.
The US dollar opened in New York on a mixed note. AUD, CAD and JPY were modestly higher, and the rest were close to flat. AUDUSD climbed from 0.7055 to 0.7086 by this morning’s open, supported by better than expected Business confidence data. NZDUSD underperformed ahead of an expected dovish RBNZ policy statement tomorrow.
USDJPY climbed to 110.64 from 110.36 on the back of the better risk tone and a tick higher in US Treasury yields.
EURUSD couldn’t get any upward traction and traded sideways in a 1.1258-1.1289 band. Weak Eurozone data and a dovish central bank have weighed on the currency pair for the past week.
GBPUSD is lost in Brexitland. Theresa May is giving an update about her EU Brexit talks to Parliament this morning before a scheduled vote on February 14. Traders are unimpressed which is why GBPUSD is languishing near its recent low.
USDCHF has been bounced about this week, and there are reports that the Swiss National Bank was likely intervening.
WTI oil prices bounced erratically inside a $51.00-$53.00/barrel range and appeared to have broken out to the top. WTI is trading at $53.32 in New York, supported by the improved risk tone and hopes for a successful US/China trade negotiation.
USDCAD drifted lower overnight and extended the losses in early trading this morning. The oil price rally and the modest “risk-on “ tone fueled the selling.
Today’s US data is third tier, consisting of the JOLTS survey and the Red Book. However, there are a flock of Fed speakers, including Powell, Mester and George. Their speeches should be non-events for FX. There isn’t any data from Canada. USDCAD will continue to track oil and broad US dollar moves
The intraday USDCAD technicals are bearish while prices are below 1.3280. This morning’s break below 1.3260 targets 1.3220 and then 1.3130. A move above 1.3290 targets 1.330 and then 1.3370 Longer term, a break of 1.3370 suggests at retest of the 1.3665 January peak, while a break below 1.3120 points to 1.3000. For today, USDCAD support is at 1.3220 and 1.3170. Resistance is at 1.3290 and 1.3330