WTI oil prices touched $50.00/barrel in overnight trading, a level last seen at the end of May. The rally has been intact since prices broke above $47.50, last week and supported by rumours that Saudi Arabia may increase prices to Asia in September. Improving oil supply and demand metrics, supported by the recent declines in weekly crude inventories have also supported prices.
The crude rally has undermined USDCAD but it is only part of the reason. A string of robust Canadian economic reports, anticipated additional Bank of Canada rate increases and a doveish Fed have been behind the lion’s share of the move.
USDCAD opened in Asia with a bit of a bid and rallied from 1.2434-to 1.2485, where it stalled. An early attempt at renewing the downtrend was thwarted by weaker than expected Canadian Industrial Product Prices in June (Actual -1.0% vs. forecast -0.2%) and a soft Raw Materials Index. (Actual -3.7% vs. 3.2%)
In Europe, Eurozone data was mostly better than expected. Eurozone core inflation rose 1.2% vs. forecast for a 1.1% gain. The Unemployment rate dropped and German Retail sales beat the forecasts. Despite all that, EURUSD traders were channeling Shania Twain and singing “that don’t impress me much.” EURUSD traded in a 1.1724-1.1761 range and opened in New York near the low.
Sterling suffered a similar fate to the euro. GBPUSD saw its best level in Asia and drifted steadily lower falling from 1.3149 to 1.3098. It popped back to 1.3119 in early New York trading.
Another missile launch by North Korea on the weekend drove USDJPY to 110.32 but it recovered in Europe and is trading at 110.52.
China’s official Manufacturing PMI data was 51.4 vs. a forecast of 51.6 which undermined AUDUSD briefly. The drop from 0.7989 to 0.7958 was reversed on rising copper prices and the currency is trading at 0.7970 in New York.
The soft China data and a drop in New Zealand Business confidence undermined NZDUSD which drifted lower throughout the European session and opened in New York at the overnight low.
Today, traders will be leery of political developments. Russia expelled 800 US diplomats in retaliation for fresh US sanctions and President Trump is still angry that he can’t get Obamacare repealed. Today’s US data includes Chicago Purchasing Managers Index, Pending Home Sales, and the Dallas Fed Manufacturing Business index.
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish while prices are below 1.2530 and looking for a break of minor support in the 1.2410-15 area to extend losses to 1.2360. Longer term the break below 1.2560 opens the door to 1.1950. For today, USDCAD support is at 1.2430 and 1.2410. Resistance is at 1.2480 and 1.2530
Chart: USDCAD 1 hour
