Canadian’s were enjoying the first “long weekend” of the summer yesterday while our friends south of the border were toiling away and feeling pretty good about the world. Treasury Secretary Steven Mnuchin’s comment Sunday about the China/US trade talks said: “a trade war is on hold.” (he then spent Monday explaining how there never was a “war,” just a disagreement))
The Trump administration threatened Iran with “severe sanctions” if Iran didn’t pull out of Syria and did not stop their nuclear program. Oil prices surged higher, rising from $71.21 yesterday morning to $72.70 in Europe, this morning. Wall Street rallied and closed with gains across the board.
On Friday, USDCAD soared from 1.2789 to 1.2909 when FX traders were disappointed by the weaker than expected inflation and Retail Sales data. They forgot all about the data on Monday when the crowded aboard the commodity currency bandwagon. Prices dropped quickly and continued to do so in overnight markets. It helped that there wasn’t any economic data and liquidity was lower than usual.
AUDUSD and NZDUSD rallied, supported by the broad US dollar retreat as well as firmer commodity prices. NZDUSD recouped all its losses after a sluggish Retail Sales report.
USDJPY peaked at 111.37 in early European trading on Monday. Prices started to slide with a dip in US 110-year Treasury yields and bottomed out overnight in Asia. BoJ Governor Kuroda reiterated that monetary stimulus would remain until inflation hits 2%.
GBPUSD was a laggard yesterday but rallied today after comments from Bank of England officials. MPC member Gertjan Vleghe said he could see two rates hikes in 2018, although Brexit uncertainty is very high. GBPUSD rallied to 1.3490 from 1.3411 but has since pulled back to 1.3455.
EURUSD bounced off of support at 1.1710 yesterday and continued to rally, touching 1.1828 just before New York opened. Prices retreated to 1.1810 suggesting the move is just a correction and not a trend change.
There isn’t any data of note today, and the data cupboard is rather bare for the rest of the week. China/US trade, North Korea summit and Iran sanction news will drive FX markets today.
USDCAD Technical Outlook
The USDCAD technicals are bullish while prices are above 1.2670, a level being guarded by support in the 1.2725-50 area, which suggests the recent USDCAD drop is just more consolidation in the 1.2720-1.2920 range. For today, USDCAD support is at 1.2750 and 1.2720. Resistance is at 1.2790 and 1.2830
Today’s Range 1.2750-1.2830