October 8, 2019

USDCAD open 1.3302-06 (6:00 am EDT)     Overnight Range 1.3290-1.3310

The US Commerce Department threw a wet blanket over nascent US/China trade talk hopes. It announced, “it will add 28 Chinese governmental and commercial organizations to the Entity List for engaging in or enabling activities contrary to the foreign policy interests of the United States.” Even so, China’s Chief Trade negotiator Liu He confirmed his delegation would be in Washington on October 11.

Trump’s apparent flip-flop on Turkey’s plans to clash with Kurds in Syria, crushed the Turkish Lira yesterday. USDTRY soared to 5.8430 from 5.7060 yesterday, and it is trading in New York, just below yesterday’s peak.

The US dollar opened with small losses against the majors except against GBP. However, those losses have been pared back in early New York trading.FX Market Snapshot

Change in currency value against the US dollar from New York close to New York open

GBPUSD plunged during the European session, dropping from 1.2301 to 1.2227. Apparently,  there were rumours that Prime Minister Johnson’s phone call with German Chancellor Angela Merkel, didn’t go very well. Reportedly, Ms Merkel told Johnson that a deal based on his latest proposals was “overwhelmingly unlikely.”

EURUSD inched higher in Asia and Europe, rising to 1.0994 from 1.0966 in early New York trading. Better than expected German August Industrial Production data,  (actual 0.3% vs forecast -0.3%) and EURGBP demand underpinned the single currency.  The short term EURUSD technicals are bearish below 1.1050.

USDJPY rallied in Asia.  Economic Advisor Larry Kudlow reportedly claimed: “the US is open to a short term deal with China as long as other issues are addressed. USDJPY rose from 107.20 to 107.40. The move was erased in Europe, and USDJPY traded at 106.93 in New York.

The trade optimism boosted AUDUSD and NZDUSD in Asia, but the gains disappeared in Europe. Renewed US dollar strength and soft Australia Business Confidence data knocked both currency pairs off their overnight peaks.

WTI oil prices have been in a downtrend since September 17 and while prices are below $54.05/barrel, the target is $51.50b/ then $48.15/b. Rising production and slowing demand are weighing on prices.

USDCAD rose steadily after support at 1.3290 was tested. Prices continued to climb in early New York trading and touched 1.3324 with traders eyeing another test of resistance in the 1.3340-50 area. Soft oil prices are underpinning the currency pair, but the real driver is broad US dollar demand.

Today’s Canadian economic reports are second-tier and not likely a USDCAD trading factor.  The US data isn’t any more impressive with PPI and Redbook data on the agenda. Traders are keeping their eye on US equity futures which suggest another negative open for Wall Street. They are also hoping for some fresh guidance from Fed Chair Jerome Powell. He speaks about “Data Dependence in an Evolving Economy” at 2:30 EDT, today.

USDCAD Technical View

The intraday USDCAD technicals are bullish while prices are above 1.3290, looking for a break of resistance in the 1.3340-80 zone to trigger a rally toward 1.3550.  A move below 1.3290 would suggest further losses to 1.3240. Below 1.3240 argues for more 1.3100-1.3350 consolidation.

 Today’s Range 1.3280-1.3360

Chart: USDCAD 30 minute

Source: Saxo Bank