August 27, 2019
USDCAD Open (6:00 am EDT) 1.3236-40 Overnight Range 1.3228-1.3255
USDCAD crashed through 1.3270 support yesterday and turned the technical bias to bearish. The improved risk tone is thanks to President Trump dialing back his anti-China trade rhetoric. Monday, he told reporters that China had made “two very good calls,” and China wanted a deal. Beijing officials denied the claims. USDCAD is also under pressure due to last weeks better than expected domestic data. Inflation and Retail Sales data beat forecasts, which suggests upside risk to Friday’s Q2 GDP data. (forecast 3.0% q/q)
The US dollar opened in New York with small losses against the G-10 major currencies except for the CHF, AUD and NZD.
Change in Currency value vs the US dollar- NY close to NY open
EURUSD traded sideways in a 1.1099-1.1115 range. Traders ignored news German GDP fell 0.1% in Q2 and Italian political developments. The Italian President could dissolve parliament and call a snap election tomorrow if 5-Star and Democratic Party officials can’t agree on a new Prime Minister.
GBPUSD continues to consolidate recent gains on hopes (still faint) of a Brexit deal before the October 31 deadline. Prime Minister Boris Johnson is making all the right noises about attempting to get an alternative deal to what Theresa May negotiated. The opposition party says it will do everything necessary to avoid a “no-deal” Brexit.
USDJPY remained soft due to lingering risk aversion concerns. A drop in US 10-year Treasury yields from 1.545% to 1.503% also weighed on prices.
AUDUSD suffered from comments by Deputy governor Guy DeBelle. He pointed out a weakening currency acts as a shock absorber in the trade war environment, hinting the RBA wouldn’t be averse to further weakness. AUDUSD dropped from 0.6778 to 0.6748.
Today’s US data includes Case-Shiller Home Price Index, and Consumer Confidence. The Canadian calendar is empty.
USDCAD Technical Outlook
The intraday technicals flipped to bearish with yesterday’s break below the uptrend line from the middle of July, which was at 1.3270. The subsequent plunge halted on long-term Fibonacci support at 1.3230, representing the 50% Fibonacci retracement of the October 2, 2018-January 2, 2019 range. A decisive break of 1.3230 targets 1.3000. For today, USDCAD support is at 1.3220 and 1.3180. Resistance is at 1.3280 and 1.3310. Today’s Range 1.3210-1.3260
Chart: USDCAD daily
Source: Saxo Bank