FX and equity markets are walking back from yesterday’s positive reaction to the US/China trade war truce.  Asia equity indices closed mixed, and the European bourses were in the red as are US equity futures.  The US dollar is down against the G-10 currency majors, led by a surge in the Japanese yen.

At issue, is the two post-dinner statements issued by China and the White House, after the trade talks.  President Trump claims China agreed to make Fentanyl a controlled substance to reduce exports to the US.  Trump claimed that China would purchase “a very substantial amount of energy, agricultural, industrial and other products from the US.”  He claimed China and the US would immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.”  Trump tweeted “China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.”

China’s statement didn’t mention any of the above specifics. China said they were willing to expand imports according to the needs of the domestic market and the people, including the purchase of marketable goods from the United States, and gradually ease the trade imbalance.”

Traders aren’t calling President Trump a “liar”, but the price action suggests a serious translation issue.


USDJPY dropped from 113.64 at the Asia open to 112.74 by the New York open, in a move fueled by falling US Treasury yields.  US 10-year Treasury yields dropped from 3.041% yesterday to 2.941% in Asia, before ticking higher to 2.957% when New York opened.


EURUSD rallied alongside the drop in Treasury yields.  The single currency is supported by expectations that the Fed will slow the pace of rate hikes in 2019.


GBPUSD soared, rising from 1.2721 to 1.2838 after the European Court of Justice issued an opinion stating that the UK can unilaterally revoke its decision to leave the European Union.


AUDUSD and NZDUSD rallied in concert with the falling dollar, supported by a rise in commodity prices.  AUDUSD got an added boost after the Reserve Bank of Australia left interest rates unchanged.  Some analysts believe the statement was a tad dovish while others said it implied an earlier than expected rate hike.


Oil prices are underpinned by reports that Opec is debating new production cuts of another 1.3 million barrels/day.  WTI climbed from an overnight low of $53.06 to $5.53/b before dropping to $54.00 when New York opened.

The oil price rally and broad US dollar sell-off led USDCAD lower, although US dollar bears are struggling to get traction below 1.3160 support.  One of the drags on Canadian dollar gains is the negative impact on domestic GDP from Alberta’s decision to cut oil production by 325,000/b/day.  Traders are looking ahead to Wednesday’s Bank of Canada policy statement.  There is some concern that the drop in oil prices could lead to a somewhat dovish result.


The intraday USDCAD technicals are bearish while prices are below 1.3220, looking for a break of support at 1.3160 to extend losses to 1.3120 and then 1.3080.   A break above 1.3220 would shift the focus to Monday gap at 1.3280.  For today, USDCAD support is at 1.3160 and 1.3120.  Resistance is at 1.3220 and 1.3260.   Today’s Range 1.3160-1.3220