FX trading was somewhat subdued overnight. Yesterday, the US dollar closed in New York with small gains against the G-10 majors except for the Japanese yen and Swiss franc, which were unchanged. At today’s open, morning, JPY, GBP and CHF are lower, and CAD, EUR and AUD are slightly higher. None of the moves are meaningful. However, since last Friday’s close, only JPY and CHF have lost ground to the greenback. All others have rallied led by a 0.81% gain in NZDUSD.
Traders are hopeful about US/China trade talks progress. Reuters reported the two sides are outlining “commitments in principle” on some key issues. President Trump’s proposed meeting with Chinese Vice Premier Liu He today is helping sentiment.
The trade negotiations helped lift global equity markets, led by a 2.25% rise in China’s Shanghai Shenzhen CSI 300. European bourses rose, and New York equity futures point to a positive opening on Wall Street.
In Asia, Australian officials tried to downplay China’s coal ban. Prime Minister Scott Morrison said “I think people should be careful about leaping to conclusions about this. This is not the first time that on occasion local ports make decisions about these matters.” Chinese officials aid Australia coal imports are proceeding normally except that customs checks have increased for environmental and safety checks. They didn’t say that the “checks” will continue until Australia gets back into line. AUDUSD firmed on the news, rising from 0.7084 to 0.7116.
The NZDUSD didn’t fare as well. It dropped from 0.6815 to 0.6760 after RBNZ Deputy Governor Bascand warned that proposals to increase bank capital requirements could necessitate an OCR cut. Prices rebounded and opened in New York at 0.6805.
In Europe, EURUSD traded in a narrow 1.1332-1.1350 range. The German IFO Survey was weaker than expected. February Business Climate was 98.5, down from the upwardly revised 99.3 previously. Traders may be a tad cautious about buying the single currency, thinking that if China/US trade negotiations point to an eventual deal, Trump will aim the EU with auto tariffs.
GBPUSD is at the bottom of its 1.3010-1.3049 overnight range but still 0.58% higher than last Friday’s closing level. Prices are supported by hopes that a “no-deal” Brexit will be avoided.
USDCAD climbed from 1.3155 to 1.3238 yesterday, fueled by broad US dollar strength and profit-taking ahead of today’s December Retail Sales data, which are expected to be soft. (Retail Sales forecast-0.3%, vs November -0.9%, ex-autos -0.3% vs November -0.6%)
Bank of Canada Governor Poloz reiterated their monetary policy stance suggesting rates may still go higher, but not in the foreseeable future.
There are plenty of Fed speakers on the rubber chicken circuit today but no actionable US data.
The intrraday USDCAD technicals are bearish while prices are below 1.3250, looking for a break of the 1.3190 to retest 200 day moving average support at 1.3150. A break of that level and then the long term uptrend line at 1.3110 opens the door for a drop to 1.3005. For today, USDCAD support is at 1.3190, and 1.3150. Resistance is at 1.3250 and 1.3310. Today’s Range 1.3150-1.3250