October 11, 2019

USDCAD open 1.3269-72 (6:00 am EDT)   Overnight Range (including post employment) 1.3223-1.3298

Canada added another 54,000 jobs in September, handily beating the forecast for a gain of 10,000.  USDCAD plunged from 1.3285 to 1.3223 on the news as the results may keep the Bank of Canada from cutting interest rates at the end of the month.  However, the details are a tad concerning.  Self-employed rose 42,300 and Government jobs rose 33,000.

Overnight, FX traders stopped to smell the roses and were overcome by the bouquet.  Positive comments from the US/China trade war front and hopes for a “break-through” in the Brexit drama gave new life to the so-called risk currencies.  Even news of a missile strike on an Iranian tanker in the Red Sea couldn’t dampen the enthusiasm.

The US dollar extended yesterday’s losses against the majors with JPY and CHF being the exceptions.

FX Market Snapshot

Change in currency value against the US dollar from New York close to New York open

President Trump agreed to meet with Chinese Vice Premier Liu He amidst reports that the latest round of trade talks “are going well.” China is reportedly eager to make a “watered-down deal” and signs that the discussions are progressing, sparked a large unwind of “safe-haven” trades.

GBPUSD is the biggest mover overnight and this week, with prices climbing from 1.2206 yesterday to 1.2660, so far, in New York trading today. Traders are reacting to a slew of reports about “constructive Brexit negotiations.” European Council head Donald Tusk said, “I have received promising signals from the Taoiseach (Prime Minister in that deal a still possible. Technical talks are taking place in Brussels as we speak. Of course, there’s no guarantee of success, and the time is practically up. But even the slightest chance must be used  Did Boris Johnson and Leo Varadkar pull a rabbit out of their hats?  Maybe so as the EU27 agreed to intensify talks

EURUSD is challenging downtrend resistance in the 1.1040-50 area, which if broken, has the scope to extend gains to 1.1140. German Harmonized CPI was 0.9% y/y in September, as expected and a non-factor for traders. Instead, they focused on Brexit and trade developments and bought the single currency.

USDJPY rallied from 107.35 yesterday to 108.24 in New York trading today. Prices are underpinned by the dramatic shift to positive risk sentiment and by a steep spike in US Treasury yields. The 10-year Treasury yields jumped to 1.680% from 1.579% yesterday. USDCHF rallied to 0.9985 from 0.9917 alongside USDJPY demand.

AUDUSD and NZDUSD jumped aboard the “risk-rally’ party bus. AUDUSD is challenging the downtrend line from the middle of July, but so far, it is still intact. NZDUSD is trading in a similar fashion but underperformed due to weaker than expected economic data.

Oil prices surged after Iran claimed two missiles struck one of their tankers traveling in the Red Sea, off the coast of Saudi Arabia. WTI oil jumped to $54.84 from $53.87 at yesterdays close.

Today’s US data includes Michigan Consumer Sentiment. More importantly, trade headlines, Brexit news and Stock prices will drive trading.

USDCAD Technical View

The intraday USDCAD technicals are bearish while prices are below 1.3280.  Today’s break below support in the 1.3230-40 area, opens the door to a retest of 1.3170, although uptrend line support at 1.3205 could be an issue.  A break above 1.3280 keeps the 1.3205-1.33 45 range intact.   The longer term uptrend line from July 17 comes into play at 1.3205. For today USDCAD support is 1.3205 and 1.3170.  Resistance is 1.3250 and 1.3280.  Today’s Range 1.3210-1.3260

Chart: USDCAD 4 hour

Source: Saxo Bank