Fed Chair Jerome Powell’s testimony to Congress didn’t offer any new insight. He repeated that the economic conditions were “healthy” and that the “economic outlook is favourable,” well noting concerns about “cross-currents and unresolved government policy issues. (Brexit, Trade)
His remarks reminded FX traders that the US rates were not going higher any time soon and that led to widespread selling of the US dollar against the major G-10 currencies. Those losses increased overnight, albeit not substantially, and not against everything. AUDUSD and NZDUSD opened with losses this morning. Weak Australian Construction Work done data (Actual -3.1% vs forecast 0.2%) provided added incentive for sellers.
USDJPY opened at the bottom of its 110.36-61 range due to a whiff of risk aversion. Pakistan reportedly shot down two Indian fighter planes in retaliation for an Indian attack on Monday.
GBPUSD continued to rally, rising from 1.3234 to 1.3309, as the risk of a “no-deal” Brexit fades. UK PM agreed to a series of votes between March 12-14, which includes a vote to prevent a “no-deal Brexit result. It could also lead to another referendum. The break above 1.3200 targets 1.3422.
EURUSD has inched higher alongside GBPUSD. The single currency is supported by mixed to slightly positive Eurozone Economic Sentiment data and comments by Bundesbank President Jens Weidmann that policy normalization is the base case for the ECB and that the Bank should look past short-term weakness. EURUSD rose from 1.1373 to 1.1402 in New York trading. The intraday technicals are bullish above 1.1360, looking for a break above 1.1420 to test the downtrend line from April 2018 that comes into play at 1.1470.
Mr Powell repeats his testimony today in front of the House Banking committee which should not be a factor for markets. President Trump is making nice with North Korea’s Kim Jong-Un in Hanoi.
USDCAD has retraced most of its gains after Trump’s twitter complaint to Opec about the price of oil. USDCAD touched 1.3223 which was the downtrend line from the February 14 peak and broke support in European trading. A rebound in WTI oil prices from $55.05 to $56.56 in New York trading this morning combined with broad US dollar selling, fueled the move lower. WTI is underpinned by the API report of a 4.20 million barrel drawdown in US crude inventories as of February 22.
Canada inflation data will be released this morning. January CPI is forecast to rise 0.2%. (December -0.1%) However, lower gas and airfare prices warn of a weaker than expected result. US data includes Factory orders and Pending Home Sales
USDCAD Technical Outlook
The intrraday USDCAD technicals flipped to bearish with the failure to break above 1.3240 resistance and the subsequent drop below support at 1.3180 and 1.3160, which is also the 200 day moving average. The USDCAD uptrend line from October is intact above 1.3115 which is also the 61.8% Fibonacci retracement of the October-Janauary 2019 range. Resistance is at 1.3180 and 1.3230. Today’s Range 1.3115-1.3180