Overnight Range 1.3458-1.3539
What a week! The US dollar has rallied big-time against the FX majors. The only exception is Sterling and that’s because GBPUSD is in its own Brexit universe.
Ovcernight FX trading was slightly mixed. The dollar is off it’s best levels against some currency pairs, while making new highs against others. The Canadian dollar is the poster boy for the latter.
USDCAD started the New York session near the overnight peak of 1.3515.and then popped up to 1.3539 before easing. The Loonie outlook is negative. The mix of bullish US dollar sentiment, soft oil prices, a doveish Bank of Canada and a domestic economy that is lagging that of the US targets 1.3800-1.4000
In Asia, the USDJPY rally stalled at Thursday’s 106.92 peak. Profit taking ahead of expected thin Friday markets in Canada and the US due to Remembrance Day holidays contributed to the move. As an aside, Reuters reported that 15 of 25 economists surveyed, see the Bank of Japan on hold until mid-2017.
Aussie and Kiwi trade choppily in fairly narrow bands and both opened the New York trading session close to their respective lows for the week.
In Europe, Sterling extended its gains, rallying from 1.2550 to 1.2655, bolstered, in part, by President-elect Donald Trump telling UK PM May that the relationship between their two countries will go from “strength to strength”.
An S&P report that the UK will have a “hard” Brexit trimmed some of the gains. “Even if Westminster were to acknowledge the EU position, it is hard to fathom how a rather hard Brexit can be avoided unless both sides become much more flexible than they appear today,” said S&P chief sovereign credit officer Moritz Kraemer.
EURUSD consolidated within a 1.0855-1.0920 range. There is some concern that Trump’s win will inspire anti-EU parties in Europe.
Oil prices traded lower. Increasing US crude inventories and record Opec production have triggered renewed oversupply/soft demand concerns. WTI is hovering just above $44.00/barrel.
It is Remembrance Day in Canada and Veterans Day in America. Bond markets are closed, but not equity markets. FX dealing rooms will operate on reduced staff. It will be a quiet day.
USDCAD technical outlook
The intraday and short term technical picture is unchanged. USDCAD technicals are bullish. The break of the recent high at 1.3515 keeps the focus on the 1.3570 area, which if broken opens the door to 1.3850. A move below 1.3380 will negate the uptrend and suggest consolidation within a 1.3250-1.3550 range. A note of caution. There is a lot of room for a downside correction to occur while keeping the uptrend intact.
Today’s Range 1.3450-1.3550
Chart: USDCAD 4 hour