FX markets are uninspired. There wasn’t much actionable, top-tier data overnight, leaving traders biding their time until the release of the FOMC minutes from the September 20 meeting.
The US dollar caught a bid after the September 20 FOMC statement and has managed to hang on to most of those gains, on anticipation of a rate hike in September. A December rate hike is almost fully priced in (91.7% according to Fedwatch)
Therefore the risk is US dollar weakness if the market determines the minutes are dovish.
Overnight, AUDUSD rallied from 0.7777 to 0.7807 on better than expected Consumer Confidence data. The move was reversed quickly. NZDUSD rallied with AUDUSD and suffered the same fate.
USDJPY bounced within a 112.20-57 range with firm Machinery Orders data not being a factor.
EURUSD chopped around in a 1.1796-1.1843 range with support derived from relief that the Catalan President opted for negotiation rather than a declaration of Independence. ECB Board member Frank Smets advocated an extended period of tapering. He has said it all before.
Sterling is off its peak level of 1.3220 on profit-taking sparked by concerns about Brexit’s impact on the domestic economy.
WTI oil prices extended gains, rising from $50.89 to $51.39/barrel. Supply disruptions and talk of a successful rebalancing of supply/demand metrics are behind the move.
The US military is stirring things up in Asia. High tech US bombers are flying near North Korea, daring Kim Jong-Un to shoot them down. A US Navy destroyer is cruising China claimed islands in the South China Sea.
USDCAD drifted higher while ignoring rising oil prices. Expectations of a US rate hike while the Bank of Canada stands pat, are supporting the greenback.
USDCAD Technical outlook:
USDCAD is in an uptrend channel, between 1.2490 and 1.2670 which, has been intact since September 18. A break below 1.2490 would target 1.2390 and then 1.2325. Resistance is at 1.2560 and 1.2590, with a topside break suggesting a move to 1.2670. For today, USDCAD support is at 1.2490 and 1.2440. Resistance is at 1.2550 and 1.2590.
Today’s Range 1.2470-1.2540
Chart: USDCAD Daily