The G20 meeting in Baden-Baden, Germany this weekend leaves traders exposed to inflammatory rhetoric. The new US administration may use this stage to promote their protectionist trade policies which may lead to US dollar demand.
The US dollar is finishing the week a lot worse for wear, undermined by a doveish FOMC meeting and vague musings by an ECB official about rate hikes in the Eurozone.
Better-than-expected US data results (Preliminary Michigan Consumer Sentiment Index for March, Capacity Utilization and Industrial Production) could spark a pre-weekend bout of profit taking after this week’s US dollar sell-off.
St Patrick’s Day and the weekend should ensure a quiet afternoon.
Quiet was the story overnight as well.
Yesterday afternoon, a re-hashed comment by US Treasury Secretary Steven Mnuchin supporting a “strong dollar”, lifted the US dollar across the board.
Shortly afterwards, the ECB’s Ewald Nowotny, musing about how the central bank could end quantitative easing, said “The American model was to finish bond purchases first, but this model might not transfer well to Europe, then added, “interest rates also wouldn’t have to be increased simultaneously nor to the same extent.”
“The ECB could also raise the deposit rate earlier than the prime rate,”
Traders only saw the last line, about interest rates rising, and EURUSD soared along with EUR crosses, including EURCAD.
Asia FX markets were extremely quiet, preferring to await the outcome of the G20 meeting and wary of headlines from the Trump/Merkel meeting today.
NZDUSD. NZDUSD inched higher on positive Business NZ PMI data and AUDUSD followed Kiwi higher.
USDJPY flat-lined, content to consolidate its-post-FOMC losses.
EURUSD held on to yesterday afternoon’s gains. The Eurozone posted a smaller trade surplus for January then for December but it wasn’t a factor for FX traders.
Sterling has held on to its post-Bank of England policy meeting gains. Monetary Policy committee member, Kirsten Forbes wanted to raise UK interest rates. Traders reacted like she did.
Oil price action is defensive. WTI traded either side of $49.00/barrel without any conviction. Traders are concerned that production continues to out-strip demand.
USDCAD is well above yesterday’s 1.3274 low but continues to be undermined by the doveish FOMC
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish. The break below 1.3420 and again at 1.3380 suggests a short-term peak is in place at 1.3532. A move below 1.3270 will target support at the well-defended 1.3210 area. A break of 1.3210 will lead down to the January low of 1.2972. A rally above 1.3380 would lead to 1.3270-1.3420 consolidation. For today, USDCAD support is at 1.3310, 1.3270 and 1.3250. Resistance is at 1.3350, 1.3380 and 1.3420
Today’s Range 1.3280-1.3380
Chart USDCAD thirty minute with support area noted