USDCAD is bid and has been since yesterday’s modestly lower than expected Q2 GDP release (Actual 2.9%, q/q vs forecast 3.0%) The currency pair soared, rising from 1.2920, just before the release to 1.3021 overnight. The GDP data was not as bad as the rally implied as it is still above the Bank of Canada’s 2.8% forecast. The rally was a ”text-book” short squeeze. Traders were short USDCAD following the break of support at 1.2960 on anticipation of both robust GDP data, month end USDCAD selling for portfolio rebalancing purposes and a trade agreement between Canada and the US.
USDCAD technicals are still bearish while prices are below the 1.3040-60 zone. There is still a risk of month-end selling, but headlines about the US/Canada trade talks will drive direction. If an agreement is announced, USDCAD will revisit 1.2880.
There was a bit of drama in the overnight session as well. Australia’s former Prime Minister Malcolm Turnbull, fresh from losing a leadership vote, resigned from parliament, taking the government’s one-seat majority with him. AUDUSD dropped from 0.7266 to 0.7231 and is trading just above that level at the open.
NZDUSD dropped, in part because of President Trump is reportedly ready to impose tariffs on $200 billion of Chinese imports, sometime next week. Those comments contributed to UISDJPY dropping to 110.69 from 111.12 on the back of risk aversion demand.
There is lots of noise, drama and data coming out of the Eurozone, but you wouldn’t know from the EURUSD reaction. The single currency is starting the New York session unchanged from where it closed yesterday. Meanwhile, Eurozone Core inflation for August was weaker than expected at 1.0%, y/y (forecast 1.1%, y/y). The Turkish Lira rallied after the government announced new measures to shore up the currency including lowering the withholding tax on lira bank deposits. Meanwhile, EU President Jean Claude Juncker said the EU would respond in kind if the US imposed tariffs on cars.
Sterling, like the euro, opened this morning at the level it closed last night.
It is going to be a short, but choppy trading day. Monday is a holiday in Canada, and the US and traders will be eager to get an early start. The expected broad US dollar selling for month-end portfolio rebalancing appears to be more fiction than fact. Today’s US data includes Chicago PMI and Michigan Consumer Sentiment. Canada releases Raw Materials and Industrial Product Prices
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish while prices are above 1.3005, looking for a move to 1.3050, which if broken will extend gains to 1.3110. A move below 1.3005 targets support at 1.2960. Longer term, USDCAD technicals are bearish below 1.3050 looking for a move below 1.2960 to target 1.2880.
Today’s Range 1.2920-1.3020