December 16, 2019

USDCAD open 1.3130-34 (6:00 am EST)       Overnight range 1.3117-1.3184

China and the US have reached a Phase 1 trade deal, but the fact sheet lacks specifics such as the total amount of increased agricultural purchases committed to by China,  leading to speculation, which annoyed the Americans. 

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin has taken umbrage at the Wall Street Journal.  Reporters Bob Davis and Lingling Wei. Wrote “negotiators offered to cut by as much as one half the tariff rates on approximately $360 billion of Chinese imports in exchange for certain purchases.”  A statement from the Trade Rep’s offices said “we have said publicly and on the record that this is totally false, untrue and baseless.  It did not happen. 

FX markets were not impressed.  The US dollar opened in New York on a mixed note, compared to where it opened on Friday.

FX Market Snapshot

Change in currency value against the US dollar from NY open 13Dec19 to NY  open 16Dec19

Source:  Saxo Bank/IFXA

FX markets are winding down for the holidays, which may have contributed to the extra-choppiness seen in GBPUSD today. Disappointing economic data, combined with the lingering GBPUSD short squeeze from the election, lifted GBPUSD from 1.3128 to 1.3420 before dropping down to 1.3320. Composite PMI (actual 48.5 vs previous 49.3), Services PMI (actual 49.0 vs previous 49.3), and Manufacturing PMI (actual 47.4 vs previous 48.9) were weaker than forecast.

Eurozone economic reports were mixed, with Services PMI exceeding expectations, Manufacturing PMI below forecasts and Composite PMI unchanged. However, German Manufacturing PMI was worse than expected (actual 43.4 vs 44.1 previously). The US may be turning their tariff cannon towards the European Union, reportedly considering 100% tariffs on some Eurozone products. The Eurozone is said to be considering carbon tariffs on the US. Happy New Year, folks.

USDJPY managed to hang on to its post Phase 1 trade deal gains and prices are underpinned by a 1.84% increase in 10-year US Treasury yields, since Friday.

AUDUSD and NZDUSD are below their peak levels following the US/China trade news but well-above their December lows. Traders ignored second-tier, New Zealand and Australian economic data.

Oil prices are higher. WTI climbed to $60.18/barrel from $59.78/b on hopes that Opec production cuts and the Phase 1 trade deal would boost demand.

USDCAD traded with a negative bias overnight. Prices were undermined by firm oil prices and broad US dollar weakness.

Today’s US economic reports include, Empire State Manufacturing PMI, NAHB Housing Market Index and Markit Service, Composite and Manufacturing PMI’s. There are not any Canadian reports of note.

USDCAD Technical View

The intraday technicals are bearish below 1.3170, supported by the break below 1.3150, which clears the way to further losses to 1.3040, fi long term support in the 1.3090-1.3105 area is cleared away. For today, support is at 1.3105 and 1.3080. Resistance is at 1.3150 and 1.3190.  Today’s Range 1.3105-1.3160.

Chart:  USDCAD 4 hour

Source: Saxo Bank