EURUSD is back flirting with its 15-month high. The European Central Bank left policy unchanged as was expected. EURUSD rose from 1.1480 to 1.1570 during Mr. Draghi’s press conference. Traders aren’t buying his doveish spin to what he described as “stronger momentum in the euro area economy which is projected to expand at a somewhat faster pace than previously expected.” Mr. Draghi repeatedly said that nothing has substantially changed as far as inflation is concerned but EURUSD held on to its gains.
Sterling got a short-lived lift from better than expected Retail Sales data. It wasn’t enough to offset the risks from the weaker than expected inflation report, released earlier this week. GBPUSD tumbled down to 1.2934 from 1.3031. It rebounded to 1.2974 during the ECB press conference.
The Bank of Japan policy meeting was earlier. They delivered as expected and left policy unchanged. However, they tweaked GDP growth forecasts higher while once again pushing back the date when inflation would reach their 2.0 percent target.
USDJPY rallied from 111.78 to 112.41 and then pared those gains in New York trading and is hovering just above 112.00
A forecast beating Australian employment report boosted AUDUSD 0.7987 from 0.7950. The unemployment rate was unchanged at 5.6% and Australia added 14,000 jobs Those gains were erased ahead of the ECB meeting. AUDUSD dropped to 0.7900, but has since bounced back to 0.7935.
NZDUSD drifted lower throughout the session but is still above Monday’s opening level.
USDCAD ignored the recent rally in oil and is stuck in a tight 1.2580-1.2680 range. USDCAD is undermined by firmer oil prices, a hawkish Bank of Canada, and the perception that additional Fed rate increases are on hold. Support is stemming from fear of the unknown. The “unknown” in this case is the start of the Nafta renegotiation.
This morning’s US data releases were second tier in nature. The drop in Initial Jobless claims to 233,000 was offset by a slightly softer Philadelphia Fed Manufacturing Index.
USDCAD Technical outlook:
The USDCAD technicals are bearish. The gently sloping downtrend channel from the end of June is intact, with support at 1.2540 and resistance at 1.2790. The intraday downtrend from the July 13 peak of 1.2770 is in place while prices are below 1.2630. A break above this level would lead to 1.2680 and then 1.2720. A break below 1.2600 opens the door to another test of 1.2580 and then the bottom of the channel at 1.2540.
Longer term, if USDCAD closes below 1.2635, it projects a deeper drop to 1.2150.
Today’s Range 1.2600-70