The Loonie is under pressure. Rising US rates, widespread US dollar strength, Sneaky American edits to USMC text, a huge setback to the Keystone XL pipeline and free-falling oil prices, sparked a 1.71% rally USDCAD since Tuesday morning. Most of the gain came after yesterday’s FOMC statement, making the Canadian dollar the weakest G-10 major currency since last Friday’s close. A Montana judge ruled against The Trump administration’s permit for Keystone Pipeline X and barred construction, claiming the government had not fulfilled all its obligations required by law. He is demanding an updated environmental review.
The FOMC left rates unchanged as expected. The accompanying statement was bland but left the door wide open to a December hike; the odds of which are 75.8% as per the CME FedWatch tool.
EURUSD retreated from 1.1405 before the FOMC statement to 1.1327 just before this morning’s New York open. The move served to fully unwind this week’s gains as the ongoing Italy/EU budget debate weighed on prices.
GBPUSD traders used the FOMC statement as an excuse to book some profits after this week’s big rally. Prices dropped from 1.3067 to 1.2992. UK economic data was mixed. September GDP was flat (forecast 0.1.%, m/m) but Manufacturing and Industrial Production reports were marginally better than expected. However, despite today’s sell-off, GBPUSD is up 0.41% for the week.
The Antipodean currencies and the Japanese yen tracked US dollar moves. Wall Street may open with small losses according to US Futures.
USDCAD took off yesterday afternoon when Reuters reported that the American’s were trying to change the text of the USMC agreement. An unnamed Canadian source said the US was putting forth stuff that wasn’t agreed.
USDCAD is supported by this week’s 7.5% plunge in WTI oil prices. Formerly bullish traders have bailed out of positions due to the risk that a prolonged US/China trade war will cause a slowdown in global economic growth and reduce demand for crude. Prices were undermined by the US granting of waivers to eight of Iran’s oil customers, greatly reducing the risk of the Iran sanctions causing a supply shortage. Furthermore, record oil production in the US in October (11.6 million barrels per day) combined with rising US crude inventories exacerbated selling pressures. WTI broke below $60.00/barrel just before New York opened and dropped to $59.30/b.
Today’s US data includes Michigan Consumer Sentiment Index (forecast 98.0%) and PPI. There isn’t any data from Canada.
The USDCAD technicals are bullish above 1.3090, supported by the break above 1.3160 which hangs a target on the 1.3220-50 area. A break above 1.3280 will challenge the 2018 peak of 1.3385.A move below 1.3090 is required to negate the bullish sentiment. For today, USDCAD support is at 1.3150 and 1.3110. Resistance is at 1.3205 and 1.3240.
Today’s Range 1.3150-1.3240.