Overnight Ranges

The Canadian dollar is under pressure. USDCAD demand following the closing of the Enbridge/Spectra Energy merger and increased anticipation of a March rate hike in the US caught bearish USDCAD traders off-guard. The steep rise in USDCAD triggered stop loss buying demand on the break through the 1.3220-1.3250 zone, accelerating the rally.

USDCAD renewed the rally after modest improvements in US Personal Income and Spending in January were noted.  At the same time, data showed that Canada’s current account deficit narrowed, which was expected and ignored by traders.

Overnight, worries about President Trump’s address to Congress proved to be for naught.  His anticipated speech proved to be just jumping-jacks for Republicans’ who sat, stood, clapped and repeated the exercise for over an hour. Only the de rigueur “honor the war hero” segment brought Democrats to their feet.  There was very little content in his remarks to give any direction for markets.

The focus quickly shifted to the March 15 FOMC meeting. Comments by San Francisco Fed President John Williams’s suggesting that he was on-board for a rate increase in March fuelled US dollar demand.  Later on, New York Fed President appeared to echo the sentiment.

The jump in Fed rate hike expectations for March pushed EURUSD lower in Asia and Europe.  Mixed Eurozone PMI data did not give any support even though economists say the data shows growth is accelerating in all the major Eurozone economies.

Sterling traded with a bearish bias in a narrow 1.2350-1.2402 range until the New York open.  Minor support at 1.2402 broke and GBPUSD dropped to 1.2324. Talk of another Scottish Referendum, on-going Bruit issues and US rate hike expectations will continue to undermine the currency.

In Asia, AUDUSD and NZDUSD traders ignored strong China PMI data.  The Auxin China Manufacturing PMI was 51.7 vs. the forecast for a 51.0 rise.

USDJPY was bid right out of the gate, rising from 112.77 to 113.65 at the start of New York trading today.

The Bank of Canada policy interest rate decision and policy statement is do this morning. No one expects the BoC to change rates which means that the risk to markets is the tone of the statement.  FX traders are expecting a dovish statement leaving room for USDCAD to retreat if it leans towards neutral.

USDCAD Technical outlook:

The USDCAD technicals   flipped   bullish yesterday with the decisive break above the January downtrend line, which was in the 1.3220-30 area.  The subsequent rally above 1.3278 (100 day moving average) argues that a short-term floor is in place at 1.3070.  The target is now the 1.3380-90 area and then 1.3470.  A move below 1.3250 points to consolidation within a 1.3210-1.3380 area.  For today, USDCAD support is at 1.3280 and 1.3250.  Resistance is at 1.3340 and 1.3380.

Today’s Range 1.3270-1.3360

Chart: USDCAD 2 hour