USDCAD Overnight Range 1.2130-1.2235      

The downward pressure on the US dollar that followed the release of the FOMC statement increased in New York when both CPI and Jobless claims missed the mark, but only slightly. The ensuing US dollar sell-off was short-lived and it has returned to pre-data levels.

Traders in Asia and Europe reviewed the FOMC statement, concluded that it was doveish and proceeded to thrash the US dollar. Kiwi was the exception. NZDUSD plunged on weaker than expected GDP data (0.2% vs forecast 0.6%) which opened the door to a July rate cut.

The FX markets have reacted predictably to what has been deemed, a doveish statement which may prove to be a mistake. The tone of the FOMC statement was fairly upbeat.

  •  The FOMC noted that “economic activity has been expanding moderately..” In April they noted that “economic activity slowed…
  •  The FOMC said that the “pace of job gains picked up” while in April job gains had moderated.
  •  The Committee wrote that “.. the underutilization of labour resources diminished”, somewhat as opposed to their April comment that labour resources      were “little changed”.
  • The statement also noted that ”Growth in household spending has been moderate” whereas the April noted a “decline”.

The above comments suggest that the slight change in wording in yesterday’s statement from the April statement is on the hawkish side of the equation. The post FOMC reaction to sell US dollars may be more a factor of disappointment that the statement wasn’t as hawkish as traders had positioned for.

As we have seen after the previous 3 meetings this year, the initial reaction gets reversed after a couple of days. Why should this move be any different?  US rates are still going up in 2015 and all the other chatter is merely noise as the Fed pares back forward guidance.

USDCAD is trading with the US dollar moves against the majors with a modest intraday bullish CAD bias on the back of stable oil prices. Tomorrows CPI and Retail Sales will be key in deciding if support at 1.2010 or resistance at 1.2350 gets tested.

USDCAD technical outlook

The intraday technicals are in a downtrend from the beginning of June peak at 1.2550 which comes into play at 1.2320. The break of supports at both 1.2240 and 1.2210 target further losses to 1.2110 and then 1.2040, with a risk of another probe of the May low at 1.1920.

For today, USDCAD support is at 1.2130, 1.2110 and 1.2060.  Resistance is at 1.2165, 1.2185 and 1.2240.

Today’s Range 1.2110-1.2180

Chart: USDCAD hourly