It is “take a client golfing day” in the trade rooms of Canada’s major banks. It is Independence Day in the US and markets there are closed. Traders have a ready-made excuse to do nothing, and that is what they will do.
China injected a bit of life into Asia FX markets when they injected a bit of calm into markets. According to Reuters, PBoC Governor Yi Gang posted a note on the website which said that FX fluctuations were being closely watched, adding the PBoC wants the yuan at a “stable and Reasonable” level.
AUDUSD traders liked the PBoC news and the better than expected domestic Retail Sales rose 0.4% (forecast 0.3%) The Australia Trade surplus narrowed slightly, but exports rose. AUDUSD climbed from 0.7378 to 0.7423. NZDUSD attempted to rally but couldn’t get above 0.6780.
USDJPY traded with a negative bias in a 110.28-110.54 range. Soft US Treasury yields and trade tensions limited topside moves.
UK Services PMI for June rose 55.1, above the 54.0 forecast. GBPUSD popped to 1.3226 from 1.3172 on the news but is trading lower as the European session winds down. The improvement in the service sector and higher inflation suggests the Bank of England could raise interest rates in August, according to Markit Economist Chris Williamson.
EURUSD drifted higher in Asia rising from 1.1654 to 1.1680. It dropped to 1.1632 despite around the Toronto opening, despite better than expected Markit PMI composite and Services reports.
USDCAD tracked broad US dollar moves, trading in a 1.3114-1.3160 range. Profit taking and bearish intraday technicals have put downward pressure on the currency pair. Traders are expecting the Bank of Canada to raise interest rates at the July 12 meeting. Better than expected Canadian employment and trade data will pretty much guarantee a move, with one caveat-President Trump. He has threatened tariffs on car imports. If he announces them between today and the July 12 meeting, the BoC would probably stand pat.
FX activity is dwindling the closer Europe gets to quitting time. On Thursday, the FOMC minutes will be released, and traders will be looking to them to provide clues as to the pace of future rate increases.
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish while prices are below 1.3160, looking for a test of support at the 1.3090-1.3105 area representing two daily lows in June. If it breaks, it targets a move to 1.3050 and then 1.2960.
For today, USDCAD support is at 1.3110 and 1.3090. Resistance is at 1.3160 and 1.3180.
Chart USDCAD 30 minute