July 3, 2019
USDCAD Open (6:00 am EDT) 1.3102-05 Overnight Range 1.3098-1.3117
FX markets traded sideways in an uneventful overnight session. Traders have gotten over the euphoria from the resumption of the US/China trade talks and are looking ahead to Friday’s US employment report.
In Asia, USDJPY dropped to a one-week low on a mild bout of risk aversion selling, in part because of President Trump’s threat of tariffs on EU imports. Prices were also pressured by falling US Treasury yields, with the 10-year yield touching 1.941% before climbing back to 1.953% in early New York trading. AUDUSD and NZDUSD are a tad higher with Aussie getting an added boost from a slightly higher than expected Trade Surplus and Building Permits data for May.
In Europe, EURUSD drifted in a narrow band, albeit with a negative bias. Eurozone Services and composite PMI data were a tad higher than forecast but not a factor for FX traders. Traders are a tad uncertain about the EU appointments. IMF Managing Director Christine Lagarde has been nominated to replace Mario Draghi as President of the European Central Bank.
GBPUSD continued to slide. The skids were greased when Markit Services PMI dropped to 50.2 from 51.0 in June. Yesterday’s remarks by Bank of England Governor Mark Carney that the US trade dispute with China and the EU could wreck the British economy didn’t help sentiment.
Oil prices are consolidating yesterday’s losses in a $56.07/barrel-$56.75/b range. Traders do not seem to be impressed with Opec and Russia’s production cap extension. However, prices found support after the American Petroleum Institute reported a 5.0 million barrel drop in US crude inventories. Ongoing trade disputes and fears of lower global demand are weighing on prices.
USDCAD is trading at the bottom of its 1.3098-1.3117 overnight range in early New York markets. Falling oil prices have limited USDCAD losses while broad US dollar weakness caps topside moves. The currency pair won’t get any support from today’s release of Canada Trade data. The deficit is expected to widen to $1.5 billion with a small drop in exports.
Wednesday’s US July 4th holiday has pulled a lot of data releases forward. Jobless Claims, Factory Orders, and ISM Non-manufacturing reports are on tap. In addition, the US trade deficit is forecast to widen to $54.0 billion from $50.8/b in April.
Wall Street closes at 1:00 pm today and an although FX markets don’t close, traders that can, will scamper home early.
The intraday USDCAD technicals are bearish while prices are below 1.3120 with the break below 1.3095 suggesting further losses to 1.3060. Longer term, the downtrend is intact while prices are below 1.3150, looking for a break below 1.3050 to extend losses to 1.2990. For today, USDCAD support is at 1.3080 and 1.3050. Resistance is at 1.3120 and 1.3150. Today’s Range 1.3070-1.3120
Chart: USDCAD daily