The Loonie got the stuffing knocked out of it yesterday, and overnight and Thanksgiving is still eleven days away. President Trump railed a Trudeau, Nafta, and “Canada’s negotiator” in a press conference yesterday. He said he refused to meet with Prime Minister Trudeau “because his tariffs are too high.” He went on to complain about being unhappy with the negotiations, Canada’s negotiating style, and said: “We don’t like their representative very much.” He even unleashed another tirade about Canada’s “300% tariffs on dairy.”
The odds for Canada agreeing to the US imposed deadline of September 30 plummeted with Trump’s remarks, and USDCAD soared, rising from a low of 1.2945 yesterday morning to 1.3064 in early New York trading today.
Jerome Powell and his colleagues on the FOMC get part of the blame for the weaker Canadian dollar. It’s not because they surprised markets with the FOMC statement, and summary of economic projections or in the press conference. They didn’t. They delivered what most economists and analysts expected. They dumped the phrase about “accommodative monetary policy” from the statement, but Mr Powell went to great lengths to explain that it was just an edit, not a policy change.
It took a bit, but the US dollar started showing signs of life just before the European open. Italian budget concerns and the reality of higher US rates while Eurozone rates remain stagnant, combined with weaker than expected Eurozone data triggered EURUSD selling. The rest of the G-10 majors tracked the dollar moves.
The Reserve Bank of New Zealand kicked things off in Asia by doing what was expected. They left interest rates unchanged and said they would stay that way until 2020.
Oil prices rose, again. WTI climbed from $71.55 yesterday to $72.58 in Europe. Prices are supported due to an expected supply shortfall when the full weight of the US sanctions on Iran take effect.
ECB President Mario Draghi and Bank of England Governor Mark Carney are speaking at a conference in Europe. Bank of Canada Governor Stephen Poloz is in Moncton, New Brunswick talking about “Technological Disruption and Opportunity.”
There is a slew of US Economic reports including Q2 GDP (forecast 4.2%) and August Durable Goods Orders. (forecast 2.0%) There isn’t any domestic data.
USDCAD Technical Outlook
The USDCAD technicals are bullish. The uptrend line from February was tested and it held. The subsequent break above 1.2970 targets the 1.3070-80 area. A topside break would confirm that another short term bottom is in place and target the June peak of 1.3385. For today, USDCAD support is at 1.3030 and 1.2970. Resistance is at 1.3080 and 1.3130.
Today’s Range 1.3030-1.3120
