This week is starting where it ended. Risk aversion, stemming from the UK vote to exit the European Union, has continued unabated. The US dollar rallied across the board except against the Japanese Yen. GBPUSD gapped lower at the Asia open and drifted down throughout the session and into Europe. It is now below Friday’s low. Moody’s downgrade of the UK’s credit rating from Aa 1 stable to negative on Friday didn’t help
USDJPY was sold on the open in Asia but stalled at 101.50. Since then Japanese officials have been leaking reports that the Prime Minister has given the green light to the Finance Minister, Taro Aso, to watch currency markets and takes steps if necessary. Many analysts and economists don’t see Bank of Japan intervention unless USDJPY is well below 100.00.
EURUSD has been fairly choppy within a 1.0985-1.1085 range with EURGBP demand off-setting EURUSD selling on expectations that the Eurozone economic growth will suffer.
Asia equity indices led by the Nikkei (up 2.39%) had a good session unlike the European indices which were a sea of red. If US equity futures can be believed, US markets aren’t heading for a stellar Monday either, as they are down.
USDCAD trading remains at the mercy of risk sentiment and oil prices. The overnight rally stalled again in the 1.3080-1.3100 area, coinciding with a drop in WTI prices from $47.93 to $47.29. There isn’t much in the way of US or Canadian data on tap today. GBPUSD will be the main driver of USDCAD trading this week, at least until Thursday, when the month-end/quarter end portfolio rebalancing flows add another layer of FX volatility.
USDCAD technical outlook
The intraday USDCAD technicals are bullish while trading above 1.2970 looking for a break of resistance in the 1.3080-1.3100 zone to extend gains to 1.3200, although resistance in the 1.3140-80 area should prove “sticky”. A move above 1.3250 opens the door to further gains to the 1.3460-1.3500 area. A move back below 1.2850 would argue for a revisit of support at 1.2640.
For today, USDCAD support is at 1.3010, 1.2970 and 1.2940. Resistance is at 1.3085, 1.3120 and 1.3140
Today’s Range 1.2990-1.3070
Source: Saxo Bank