EURUSD popped higher in New York trading after European Central Bank (ECB) President Draghi admitted that downside risks to the Eurozone economy had diminished. Earlier, the ECB policy statement was as expected. Mr. Drahi’s press conference has made for choppy trading. EURUSD rallied from a low of 1.0880 to 1.0932 and back down to 1.0890.
US Durable Goods and Initial Jobless Claims data were below forecasts but did not have much impact on trading.
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Sterling rallied overnight, rising from 1.2841 to 1.2915. Polls show the Conservative Party leading Labour, 39.25 to 28.2. Traders believe that a large government majority will strengthen the UK’s ability to negotiate Brexit.
The Canadian dollar was very lively in overnight trading thanks to President Trump and his administration’s trade policy communication.
On Wednesday, USDCAD was climbing due the new US softwood lumber countervailing duties, the threat to the dairy industry, falling oil prices, a doveish Bank of Canada and M&A flows.
The nail in the coffin was yesterday afternoon’s rumour that. President Trump would announce that he was taking the US out of the NAFTA agreement.
President Trump back-tracked on that threat in a call to the Mexican President and Canada’s Prime Minister. He now plans to bring NAFTA up to date through renegotiation. USDCAD dropped on the news but has since retraced 50% of those losses. USDCAD has traded in a 1.3555-1.3590 range since New York opened.
In Asia, the Bank of Japan monetary policy statement did not cause mush of a stir. USDJPY inched up from an opening level of 111.04 ahead of the BoJ announcement but couldn’t get any traction above 111.37.
AUDUSD and NZDUSD managed to squeeze out gains in overnight trading but those gains were sustained. Both currency pairs opened in New York at or near yesterday’s closing levels.
Oil prices drifted higher in Asia but the move was reversed in Europe and WTI opened in New York at $49.28, near where it closed, and then dropped again, touching $48.52 this morning. Traders are still torn between oversupply and whether Opec will extend production cuts.
There isn’t any Canadian data, leaving USDCAD at the mercy of oil prices and trade sentiment. However, the prospect of USDCAD selling for month end portfolio rebalancing in a market that is already well-long USDCAD points to heightened downside risk in the next 28 hours.
USDCAD Technical outlook:
The intraday USDCAD technicals are mixed. Traders are looking for a move below 1.3520 or above 1.3605 to give direction. Until then, choppy consolidation inside the 1.3520-1.3605 range is likely, although the bias is for an upside break. A move below 1.3520 would target 1.3460 and suggest a short-term top is in place at 1.3645. For today, USDCAD support is at 1.3520 and 1.3480. Resistance is at 1.3605 and 1.3645.
Today’s Range 1.3520-1.3620
Chart: USDCAD 1 hour
Source: Saxo Bank
Donald Trump’s Nafta musings snapped USDMXN out of the 18.4630-18.9350 range that had contained price action for all of April. While the minor intraday uptrend at 18.9360 is intact, traders will look for a test of resistance at 19.4200. A move below 18.9360 suggests renewed downside to 18.5775.
Chart USDMXN 4 hour