October 21, 2019

USDCAD open 1.3103-07 (6:00 am EDT)     Overnight Range 1.3105-1.3139

The Brexit drama isn’t over, but the Fat Lady is warming up in her dressing room.  The UK inched ever closer to leaving the EU with a deal, and GBPUSD surged to 1.3010 before slipping to 1.2975 overnight.

It was a quiet Asia FX session but that wasn’t the case in Europe.  The US dollar has succumbed to positive risk sentiment with the commodity bloc currencies and GBP a tad higher, compared to Friday’s close, while JPY and CHF are a bit softer.

FX Market Snapshot

Change in currency value against the US dollar from New York close to New York open 

GBPUSD dropped in early Asia trading following the news that UK Prime Minister Boris Johnson failed to get MP’s to vote on his Brexit deal. Instead, it was postponed, and he was forced to send a letter to the EU, asking for an extension to the October 31 deadline. GBPUSD dropped from 1.2963 to 1.2876. Later, prices rebounded after Foreign Secretary Dominic Raab said the government had the votes to get the deal passed.  Prices were further supported by news that the European Commission is considering the requested extension.  The drama will continue today. Boris Johnson hopes for a “meaningful vote” which could occur around 9:30 am EDT.

EURUSD dropped from 1.1171 to 1.1138 in Asia and then rallied to 1.1178 in Europe, mirroring GBPUSD moves.  German September PPI rose 0.1% m/m, (forecast -0.1%) but was not a factor. Mario Draghi’s final meeting as ECB President is on Thursday.

USDJPY firmed on the back of higher US 10 year Treasury yields which climbed to 1.78% from 1.741%. Also, traders expect a dovish Bank of Japan meeting on October 31, which includes the risk of new monetary policy stimulus.

The antipodean currencies are firm. AUDUSD rose to 0.6878 from 0.6846, thanks to the combination of renewed positive risk sentiment due to Brexit developments and the ongoing US/China trade talks. NZDUSD climbed to .6406 from 0.6372.

Oil prices dropped in Europe following news that China is asking the WTO for $2.4 billion in retaliatory sanctions against the US. Traders viewed this development as another sign that the US/China trade talks will drag on.

USDCAD followed the antipodean currencies lower.  USDCAD losses are due to broad US dollar weakness.   EURUSD gains above 1.1120 and US Dollar Index (DXY) losses below 98.20, predict further US dollar selling pressure to come. 

USDCAD Technical View

The intraday USDCAD technicals are bearish below 1.3170 looking for test of the 2017 uptrend line of 1.3080.  A decisive break of the 1.3060-80 zone would warn of further losses to 1.2870. A break above 1.3180 targets 1.3240.  For today, USDCAD support is at 1.3080 and 1.3040.   Resistance is 1.3140 and 1.3180. Today’s Range 1.3070-1.3140

Chart: USDCAD 30 minute

Source: Saxo Bank