The weekly US Jobless Claims beat the forecast again. (Actual 234,000 vs. forecast 238,000) The data helped to underpin the US dollar and suggests upside risks to next week’s US nonfarm payrolls report. The rest of this morning’s second tier US data was mixed.
The US dollar has made a serious dent recouping yesterday’s losses after the FOMC minutes were released. The initial reaction was that the minutes were doveish but it appears that after closer scrutiny, the references to balance sheet shrinkage and the prospect of two more rate increases in 2017, changed the conclusion.
EURUSD peaked at 1.1249 early in the European session and drifted steadily lower, peaking below 1.1200 after the US data.
Sterling had an extra choppy session, climbing to 1.3013 in Europe and then dropping to 1.2941 after weaker than expected GDP data. (Q1 GDP Actual 2.0% vs forecast 2.1%, year over year)
USDJPY started in Asia at the overnight low of 111.51 and crawled higher, opening in New York at 111.89.
NZDUSD began the overnight session at 0.7052 and then retested that high after the New Zealand government’s budget. The government forecast a larger than expected surplus in 2017. It was quickly forgotten and NZDUSD dipped down to 0.7024.
AUDUSD rallied on the “doveish” FOMC minutes but could not sustain the gains and dropped from 0.7514 to 0.7467.
The 172nd (Ordinary) Opec meeting that began today was a big driver of oil price volatility. Oil prices popped to $51.97/b.in early European trading. Then news broke that Saudi Arabia would not support deeper production cuts but just an extension of the existing agreement, to March 2019. WTI plunged to $50.20/b before settling in around $50.70 in New York trading.
Trading volumes may shrink this afternoon ahead of the G7 meeting on May 26-27 in Taormina, Italy and Friday’s US GDP and Durable Goods reports. In addition, Monday is Memorial Day in the US and more than a few traders will extend their long weekend by taking Friday off as well.
USDCAD Technical outlook:
The USDCAD technicals are bearish. The break of 1.3450, the April uptrend line and the move below 1.3440, the 61.8% Fibonacci retracement level of the April-May range point to further downside. In addition, the downtrend line from the May peak of 1.3792 is intact while prices are below 1.3580. For today, USDCAD support is at 1.3390 and 1.3360. Resistance is at 1.3460 and 1.3490.
Today’s Range 1.3390-1.3450
Chart USDCAD 30 minute
Source: Saxo Bank