October 25, 2019

USDCAD open 1.3062-65 (6:00am EDT)  Overnight Range 1.3062-1.3075

FX markets drifted into the weekend on a sleepy note. There was a dearth of data, more Brexit theatrics, a lingering stench from US VP Pence’s somewhat anti-China speech, and zero incentive for traders to get involved. 

The US dollar opened in New York close to unchanged against the major G-10 currencies.

FX Market Snapshot

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

US Vice President Mike Pence’s speech on China was a tad less than cordial. He accused China of growing increasingly “aggressive and destabilizing” in the past year and offered veiled support to Hong Kong protestors. It’s hard to see how his remarks will encourage China to provide concessions during the trade talks.

EURUSD flatlined in Asia then inched higher in Europe, only to have the rally thwarted by dovish comments from ECB Governing Council member and Belgian Central Bank Governor Pierre Wunsch. He said, “Knowing last year what we know about the economy today – that we’re not just experiencing a temporary soft patch – we would not have stopped quantitative easing (in 2018).” He added, “If the incoming news is not very positive – and it hasn’t been positive since the decision – it reinforces the case for the decision.” However, the EURUSD range was just a narrow 1.1101-21 band. The German IFO survey results were steady

GBPUSD traded quietly. ECB Chief Negotiator Michel Barnier said the ECB could not decide on the length of a Brexit extension, without knowing the results of the election debate. UK Prime Minister wants an election on December 12, and Labour leader Jeremy Corbyn insists that first, Johnson has to rule out a “no-deal” Brexit. GBPUSD traded in a 1.2828-62 range.

USDJPY traded like a pegged currency, drifting in a 108.57-69 range. AUDUSD and NZDUSD traded sideways.

USDCAD continues to probe major support in the 1.3060 area. Traders are looking ahead to next week’s Bank of Canada monetary policy meeting and the release of the Monetary Policy Report. However, Wednesday’s FOMC meeting will set the tone to US dollar direction. US rates are expected to be cut by 0.25%, but traders are concerned that the FOMC may indicate the “mid-cycle adjustment is over, which should underpin the US dollar.

US Michigan Consumer Sentiment (forecast unchanged at 96) is the only data of note available today.

USDCAD Technical View

The USDCAD technicals are unchanged. The intraday technicals are bearish below 1.3100, looking for a break of 1.3040 to extend losses to 1.3010. A decisive breach of the bottom would target 1.2728. For today, USDCAD support is at 1.3040 and 1.3010. Resistance is at 1.3090 and 1.3140. Today’s Range 1.3040-1.3100

Chart: USDCAD 4 hour

Source Saxo Bank