February has not been kind to the Loonie. USDCAD found a bottom (1.3077) at the beginning of the month and has been grinding higher ever since. A drop in West Texas Intermediate (WTI) contributed to the gains, but the more significant factor was widespread demand for US dollars following the strong US nonfarm payrolls report. Yesterday’s weaker than expected Ivey PMI reading (Actual 54.7 vs forecast 56.0) didn’t help. Brexit woes and soft Eurozone data added to the greenback’s demand and the Canadian dollar was caught in the cross-fire.
The US dollar extended yesterday’s gains in a somewhat subdued overnight session with Chinese markets still closed for New Year’s celebrations. European markets were quiet ahead of this morning’s Bank of England policy meeting and quarterly inflation report.
EURUSD dropped from 1.1362 to 1.1333 after the European Commission downgraded Eurozone growth and inflation outlooks in their Winter Economic Forecast. German GDP growth was cut from 1.8% to 1.1%.
GBPUSD sank below 1.2900 and continued sinking until pausing at 1.2856. “No-deal” Brexit fears ratcheted higher, helped by comments from European Council President Donald Tusk who tweeted “I’ve been wondering what that special place in hell looks like, for those who promoted #Brexit, without even a sketch of a plan how to carry it out safely.” The Bank of England voted 9-0 to leave rates unchanged. Traders are awaiting Governor Carney’s remarks.
In Asia, NZDUSD got thrashed after the employment report missed expectations. NZDUSD dropped from 0.6830 to 0.6746 on the news and speculation of a dovish bias for next week’s Reserve Bank of New Zealand monetary policy meeting.
USDJPY traded quietly in a narrow range. Prices were undermined by soft US Treasury yields, technical resistance in the 110.10 area
For today, there are speeches by Fed Vice Chair Richard Clarida, Dall Fed President Robert Kaplan and St Louis Fed President James Bullard. US data includes weekly jobless claims report. There isn’t any data from Canada.
The intraday USDCAD technicals are bullish following the move above 1.3200, looking for a move above 1.3290 to extend gains to 1.3365. A break below 1.3220 would lead down to 1.3150 For today, USDCAD support is at 1.3220, 1.3190 and 1.3160. Resistance is at 1.3290 and 1.3360. Today’s Range 1.3200-1.3290