USDCAD hit 1.2962 yesterday morning and dealt at 1.3080 in early New York trading. A litany of woes combined to turn USDCAD sellers into buyers.
The Nafta negotiations do not appear to be moving in Canada’s favour. Canada was not included in the latest US/Mexico auto talks despite Canadian requests for an invitation.
Canada’s Foreign Minister Chrystia Freeland’s busy-body tweet caused an angry reaction from Saudi Arabia. They kicked out Canada’s Ambassador, cancel Saudi Airline flights to Toronto, cancel purchases of Canadian Wheat, recall 7,000 students from Canadian universities and threaten to scrap a 15 billion armored car purchase.
Yesterday’s weak July Ivey PMI result (Actual 56/.7 vs June 65.1) suggests that the US/CAD trade spat may be having an effect on the economy, although the Ivey data is known for being erratic.
Expected Bank of Canada rate hikes may be delayed due to the uncertainty around Nafta, especially with the threat of a 25% tariff on car imports to the US.
USDCAD may not be getting much benefit from relatively high oil prices because Canada’s main crude export, Western Canada Select) is trading at a $40.00/ barrel discount to WTI.
Overnight, Sterling and yen were the biggest movers. USDJPY dropped from 111.42 to 110.82 where it is trading in New York. Weak Asia equity markets, flat US Treasury prices, and US/China trade tensions led to USDJPY selling on mild risk aversion.
GBPUSD losses accelerated in Europe, falling from 1.2958 to 1.2859 in New York, this morning. Rising risks of a “no-deal” Brexit, a lack of actionable economic data, and negative comments from officials are weighing on the currency
EURUSD reversed yesterday’s gains. After peaking at 1.1627 prices tumbled to 1.1593. The move is supported by the vastly divergent Fed and ECB monetary policies.
AUDUSD firmed in early Asia trading but reversed the move in Europe and opened in New York at 0.7411, slightly worse than yesterday’s 0.7419 New York close. NZDUSD rallied in early trading touching 0.6761 but couldn’t hang on to the gains. Traders are awaiting the RBNZ monetary policy announcement later today. No change in rates is expected.
There isn’t any US or Canadian economic data today. FX direction will be determined by equity moves and headlines.
USDCAD Technical Outlook
The USDCAD technicals are bullish. The reversal from yesterday’s 1.2962 low, combined with the break above resistance in the 1.3040-60 level argues that a short term bottom is in place. A break above resistance at 1.3110 would target 1.3190. A break below 1.3040 would suggest further 1.2962-1.3090 consolidation is ahead. For today, USDCAD support is at 1.3050 and 1.3010. Resistance is at 1.3090 and 1.3110.
Today’s Range 1.3040-1.3110.