August 21, 2019

USDCAD Open (6:00 am EDT) 1.3302-06         Overnight Range 1.3256-1.3324

Canadian inflation soared in July.   Headline CPI rose 0.5% m/m (forecast 0.2%) and Core CPI rose 0.3% m/m. Statistics Canada said “The Consumer Price Index (CPI) rose 2.0% on a year-over-year basis in July, matching the increase in June. Prices increased year over year in all eight major components.” Core CPI was unchanged at 2.0% which is the mid-point of the Bank of Canada’s 1-3% medium term inflation target and suggests the BoC may be in no hurry to cut interest rates.

USDCAD was trading at the overnight low of 1.3299 prior to the data and dropped to 1.3256 immediately afterwards. The USDCAD losses were exacerbated by the rise in WTI oil prices.  

The Canadian and Australian dollars were the only G-10 major currencies to gain against the US dollar in early New York trading. The US dollar is mixed following a subdued overnight session.

FX Market Snapshot

Change in Currency value vs the US dollar-   NY close  to NY open

FX markets are awaiting this afternoon’s release of the FOMC meeting minutes. The impact from the minutes should be minimal ahead of Fed Chair Jerome Powell’s speech Friday at the Jackson Hole symposium.

 President Trump cancelled a state visit to Denmark after being told he could not buy Greenland. Asia equity indices followed Wall Street’s lead and drifted lower.

EURUSD chopped about in a narrow 1.1089-1.1104 range. Sentiment is negative due to bearish technicals targeting 1.0850, while prices are below 1.1140. Italian politics are another negative after Prime Minister Conte resigned and politicians from various party’s scramble to form another coalition or face an election.

GBPUSD rallied to 1.2174 yesterday after reports German Chancellor Angela Merkel hinted that she was open to discussing the Irish border issue. However, concerns about today’s Merkel/ Prime Minister Boris Johnson meeting led to steady selling and GBPUSD is trading at 1.2127. Consensus sentiment suggests that any positive comments following the meeting would trigger another GBPUSD rally.

USDJPY traded with a small bid in a 106.24-106.59 range, as they tracked US Treasury yields. Prices rallied when 10-year Treasury yields climbed from 1.552% to 1.601% and retreated as yields slipped to 1.58% in early New York trading.

The slightly better tone to risk sentiment lifted AUDUSD while NZDUSD underperformed due to the RBNZ’s dovish outlook.

Oil prices were underpinned by a 3.5 million barrel drop in US crude inventories, as reported by the American Petroleum Association.

US July Existing Home Sales are expected to rise 2.5%.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish following the failure to break above 1.3340.  However, the down move is merely corrective unless 1.3250, the uptrend line from July 22 is broken.  If so, USDCAD will drop to 1.3050 and suggest renewed 1.3050-1.3350 consolidation.  A break above 1.3350 targets 1.3440.  for today, USDCAD support is at 1.3250 and 1.3180.  resistance is at 1.3310 and 1.3340

Today’s Range 1.3240-1.3310

Chart: USDCAD 4 hour

Source: Saxo Bank