China is sending Vice Commerce Minister Wang Shouwen to America for trade talks, and the discussions may include dinner. Traders jumped all over the news and unwound a significant portion of yesterday’s “risk-off” trades. Asia equity indices still closed with small losses, but European indices and US equity futures are higher. US Treasury yields rose, and commodity prices firmed.
The China/US trade talks are a good start, but the negotiating teams aren’t decision makers leaving plenty of room for more Trade angst.
Turkey indigestion was alleviated by Qatar, not “Pepto Bismol.” The Arab nation promised a $15.0 billion investment in Turkey. The American’s “harrumphed” and said the new tariffs on Turkish goods would stay in place. USDTRY retreated further, and prices are only modestly above pre-crisis levels.
EURUSD popped in Asia following the China/US trade talk news, triggering stop losses above 1.1360 and it climbed to 1.1397 before easing down to 1.1367 into the New York open. FX technicals analysts are suggesting EURUSD is basing while prices are above the 1.1290-1.1305 area.
Sterling bounced on the China story, but the beleaguered currency could not get any love despite a robust UK Retail Sales report (Actual July 0.7% vs forecast 0.2%) GBPUSD climbed from 1.2687 to 1.2731 in Asia but couldn’t extend the gains after the data. “No-deal” Brexit continues to weigh on the currency and GBPUSD retreated to 1.2695 in New York trading.
USDJPY rallied on the improved risk tone, climbing from 110.47 to 110.92, where the rally stalled.
AUDUSD had a big day rising from 0.7216 to 0.7277 after the unemployment rate dropped to 5.3% from 5.4%. The improved risk tone supported the gains and AUDUSD is trading in New York at 0.7270.
Oil prices bounced from yesterday’s lows rising from $64.45/b to $65.22. Profit taking and the improved risk tone fueled the rally.
The bounce in oil prices, the apparent “thaw” in US/China trade tensions and the drop in USDTRY undercut USDCAD which consolidated yesterday’s losses in a 1.3116-1.3153 range. Canadian dollar support comes from expectations of additional Bank of Canada rate increases in 2018, and strong economic growth. The currency is undermined by fears of a faster pace of US interest rate increases and the Nafta renegotiations.
Canada Manufacturing shipments data is expected to rise 0.9% m/m, a touch lower than May’s 1.4% gain. US data includes Housing Starts, Initial Jobless Claims Building Permits and the Philadelphia Fed Manufacturing Survey.
USDCAD Technical Outlook
The intraday USDCAD technicals are neutral inside a 1.3120-1.3140 band. A topside break would lead to 1.3180 while a downside break would test 1.3080. Longer term, USDCAD is in a 1.3000-1.3200 range.
Today’s Range 1.3080-1.3150