October 30, 2019

USDCAD open 1.3079-83 (6:00 am EDT)    Overnight Range 1.3078-1.3093

“It’s showtime.  Let the games begin.”  The highly anticipated FOMC meeting statement is released at 2:15 pm EDT.  A 0.25% rate cut is baked into market prices already leaving the only uncertainty being if the cut is the end of the “mid-cycle adjustments.”  If President Trump had his way, there would be more rate cuts to come.  Yesterday he tweeted: “ Over in Europe and Japan they have NEGATIVE RATES. They get paid to borrow money. Don’t we have to follow our competitors?”  @Varneyco  Yes we do. The Fed doesn’t have a clue! We have unlimited potential, only held back by the Federal Reserve. But we are winning anyway!”

FX action was understated overnight, and the US dollar opened in New York, unchanged to slightly lower.

FX Market Snapshot

Change in currency value against the US dollar from New York close to New York open 

 GBPUSD consolidated yesterday’s gains following yesterday’s news of a UK election on December 12. The bookies have Boris Johnson’s Conservative Party the odds on favourite to win a majority. GBPUSD traded in a 1.2860-1.2904 range overnight and opened 1.2886 in New York.

EURUSD stayed in a very narrow 1.1108-1.1122 range ahead of today’s FOMC meeting. A host of Eurozone data was mostly as expected, offering a mixed bag of results. The Eurozone Consumer Confidence Index was 7.6, as expected, in October.

USDJPY’s trading range was just 108.82-89, even narrower than that of the single currency. Traders are awaiting the FOMC meeting and the Bank of Japan meeting tomorrow. Some analysts warn that the BoJ may announce new stimulus measures.

Reuters reported that China was balking at the US demand for a commitment to chunky agricultural purchases which could delay the signing of the Phase 1 trade deal. Trump has often tweeted that China would buy around $50 billion in US farm products which would upset China’s “supply-demand balance.”

The story did not have much impact. AUDUSD and NZDUSD traded firmer despite Australia Q3 CPI rising 0.5% q/q compared to 0.6% previously.

USDCAD tested support at 1.3040 yesterday morning. It held, and prices traded higher until the close, and then it had a quiet overnight session. The Bank of Canada Monetary statement and quarterly Monetary Policy Report (MPR) are due today. The overnight rate is expected to be left unchanged at 1.75% while the MPR details could suggest a rate cut at the January meeting.

There aren’t any US or Canadian economic reports due today.

USDCAD Technical View

The USDCAD technicals are bearish while trading below 1.3110, but yesterday’s test of, then bounce from, the 1.3040 level, broke a 10-day downtrend, with the move above 1.3080. A break above 1.3140 would argue that a short term bottom (at 1.3040) is in place and target 1.3250. For today, USDCAD support is at 1.3040 and 1.3010. Resistance is 1.3110 and 1.3140. Today’s Range 1.3060-1.3140

Chart: USDCAD 1 hour

Source:  Saxo Bank