USDCAD broke above key resistance overnight which sets the stage for a return to the March peak of 1.3535. Bank of Canada Deputy Governor Lawrence Schembri’s speech in Vancouver, yesterday, didn’t do anything to instill confidence in the Canadian dollar. Instead, he focused on the risks to the Canadian economy while downplaying the recent better than expected economic reports.
That wasn’t the only factor behind USDCAD strength. The large increase in US crude inventories as reported by the American Petroleum Institute, drove WTI oil prices and the Canadian dollar down.
FX markets will take direction from Wall Street. Wall Street is using the headlines around the Trump healthcare bill as an excuse to book some of the profits achieved since the Trump election. The Dow Jones Industrial average has gained over 17% in that time.
EURUSD tried to extend gains made in New York in early Asia trading but couldn’t get above 1.0817. The proximity of the medium-term downtrend line in the 1.0890-00 area and ongoing concerns about the Eurozone and Brexit tempered the buying enthusiasm.
ECB board member and Bank of France President Francois Villeroy put a damper on speculation that the ECB may be shifting its policy stance when he said “We are reasonably confident that both headline and underlying inflation will converge, close to our target in 2019, “Given this progress, should we stop pursuing an accommodative monetary policy? At this stage, the answer is clearly no.”
Sterling traded in a narrow 1.2460-1.2505 range supported by the broad US dollar weakness and a further unwinding of GBPUSD short positions.
The antipodeans were under pressure. AUDUSD dropped steadily from 0.7688 to 0.7650 before attempting to rally in Europe. That move was short lived and AUDUSD dropped to 0.7640. NZDUSD churned inside a 0.7018-0.7047 band.
The Federal budget is tabled today at 4:00 pm EDT but should not have any impact on the currency.
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish. The break above resistance at 1.3360 and 1.3380 has shifted the focus to 1.3540, the March peak. A break above 1.3530 would suggest that a short-term bottom is in place at 1.3270. For today, USDCAD support is at 1.3380 and 1.3350. Resistance is at 1.3520 and 1.3560.
Today’s Range 1.3360-1.3540
Chart: USDCAD 30 minute