May 1, 2019
USDCAD Open (6:00 am EDT) 1.3394-97 Overnight Range 1.3380-1.3400
May 1 holiday’s around the globe made for a tranquil FX session. The few markets that were open had little incentive to trade ahead of this afternoon’s US FOMC meeting. It wasn’t a complete write-off. New Zealand made sure of that.
NZDUSD tumbled from 0.6678 to 0.6631 after a weaker than expected employment report. Analysts suggest that falling wage growth and slowing GDP growth may force the RBNZ to cut the OCR rate next Wednesday. Prices recovered to 0.6662 on the back of broad US dollar weakness against the G-10 majors. The Australia Performance of Manufacturing Index was better than expected (Actual 54.8 vs forecast 51.0), and AUDUNZD firmed.
Japan was still closed for Golden Week holidays, and it was joined by most of Europe, leaving the UK to pick up the slack. GBPUSD rallied to 1.3071 from 1.3030, when Markit Manufacturing PMI at 53.1 beat forecasts. Prices got an added lift by better than expected Nationwide Housing Price data.
President Trump tried to spark interest when he tweeted his thoughts about the Fed. He wrote: “China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go… ….up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!” Traders ignored him, and the Fed is likely to as well.
USDCAD is consolidating yesterday’s losses, sparked by month-end portfolio rebalancing flows. USDCAD plunged from 1.3463 to 1.3380 yesterday and then drifted in a 1.3380-1.3400 range overnight. Bank of Canada Governor Stephen Poloz’s testimony to the House Finance Committee wasn’t much different from the MPR statement. He repeated, “the Canadian economy is currently facing some headwinds, but there is good reason to believe that the economy will accelerate in the second half of this year.”
There is a small risk that the FOMC could be a tad more hawkish than expected if they acknowledge the recent string of better than expected US economic data. This morning’s ISM Manufacturing PMI report (Forecast 55.0 vs previous 55.3) could tip the scales in the hawks favour if it is higher than forecast.
USDCAD Technical Outlook
The intraday technicals are mixed. Support from the uptrend line from the middle of April coupled with additional support at 1.3380 favours a retest of 1.3460. Conversely, the intraday downtrend from yesterday’s peak is looking for a break below 1.3380 to lead to a test of 1.3320. However, the long term trendlin is intact while prices are above 1.3220. For today, Support is at 1.3380 and 1.3340. Resistance is at 1.3410 and 1.3440.Today’s Range 1.3380-1.3440
Chart: USDCAD 1 hour