USDCAD   Overnight Range 1.3020-1.3103    

USDCAD took off like a viral video when early New York/Toronto traders found their desks. One look at the overnight FX markets was enough for traders to pull the Loonie from the sidelines and put it in the game. USDCAD grabbed the ball and took off, streaking down field, touching 1.3103 from a 1.3033 start.  It has since retreated but if the 1.3040-50 area holds, 1.3350 will soon be trading.

A big part of the story is China.  The move started in Asia with the release of worse-than-expected Caixin (formerly HSBC) Manufacturing PMI which dropped to 48.2 in July, down from 49.4 in June and well below the 49.7 that had been forecast. That news sparked chatter of a PBoC rate cut. Shortly after, headlines came out stating that “China to expand CNY trading band”. Fears of a worsening Chinese slowdown gave the US dollar a bit of a bid and commodity markets got nervous.

The Asia session set the tone for Europe. Eurozone PMI‘s missed forecasts, putting downward pressure on EURUSD heading into the weekend and next week’s FOMC meeting. That same theme is playing out this morning in New York. Yesterday’s strong US data and the prospect of a similar result with today’s New Home Sales report will feed expectations of a hawkish FOMC statement next week and keep the US dollar in demand.

Technical Outlook

The USDCAD intraday technicals are bullish while trading above 1.2980 with the break of resistance at 1.3070 opening the door for 1.3450. A move back below 1.3000 would delay the inevitable. For today, USDCAD support is at 1.3050 and 1.3030 and 1.3010.  Resistance is at 1.3110 and 1.3130.

Today’s chart is a long term weekly view that highlights the Fibonacci retracement projections for the entire 2002-2007 range.

Today’s Range 1.3040-1.3110

Chart: USDCAD weekly with Fibonacci