USDCAD took a much-needed breather in overnight markets after yesterday’s wild moves. USDCAD touched 1.3120 yesterday morning on fears of Saudi asset sales and rallied because Canada was invited back into the US/Mexico trade talks next week. There are reports that Mexico and the US have come to terms on autos. Does Canada have to accept the term? The USDCAD sell-off was because more talks are scheduled next week, and there are rumours that all parties want a deal by August 25. On the other hand, if Saudi Arabia is truly selling Canadian assets (and Canadian dollars), it is hard to believe that the current USDCAD level is sustainable.
Sanctions were on everyone’s mind in Europe. The US hit Russia with fresh sanctions which come in two parts. The first set covers exports of dual-use technologies while the second set gives Russia 90 days to prove they aren’t using chemical or biological weapons. Russia says it will retaliate.
The US dollar inched higher, but not convincingly. CAD, CHF, and GBP are virtually unchanged from Wednesday’s closing levels.
USDJPY firmed ahead of Japan/US auto talks in Washington. Japan wants to avoid being slapped with 25% tariffs on cars.
GBPUSD extended yesterday’s losses overnight. “No-deal Brexit” fears and concern about the longevity of Theresa May’s government weighed on the currency. Prices rebounded to yesterday’s closing level at the New York open. EURUSD is a non-story. It is rangebound inside at 1.1510-1.1750 range
NZDUSD was the biggest loser overnight. The RBNZ doubled down on their dovish outlook and lengthened the period for unchanged rates from 2019 into 2020. NZDUSD gapped lower plunging from 0.6750 to 0.6650 by the New York open.
Today’s US data releases include PPI and Initial Jobless Claims. Canada releases July Housing Starts and New Housing Price Index. For USDCAD, Nafta and Saudi Arabia will dictate currency direction.
USDCAD Technical Outlook
The USDCAD technicals are bullish while prices are above 1.2960 and targeting a retest of resistance at 1.3250. USDCAD is currently consolidating yesterday afternoon’s drop in a 1.3000-40 range. A break above 1.3040 targets 1.3080 and 1.3120 while a move below 1.3000 will lead to 1.2960. For today, USDCAD support is at 1.3010 and 1.2980. resistances is at 1.3040, 1.3080 and 1.3120.
Today’s Range 1.3010-1.3090