The US dollar rally is not dead. Far from it. The greenback closed on a firm footing yesterday and extended those gains in an uneventful overnight session.
The US economic cupboard is bare; just JOLTS and Redbook Index. Neither of the reports will spark any FX trading interest. Instead, traders will be looking to headlines for direction. President Trump takes his bluster and belligerence to the NATO Summit on July 11-12. He will demand that members live up to their financial commitments, or threaten to walk. He is scheduled to meet the UK Prime Minister on Friday, and as of today, it is still Theresa May. Additional meetings with Queen Elizabeth and Russia President Putin follow.
EURUSD scraped out gains in early Asia trading. The rally stalled at 1.1761 and prices retreated to 1.1735. Weaker than expected German and Eurozone ZEW surveys drove the single currency to 1.1715 where it is currently trading.
Sterling recovered from yesterday’s 1.3191 low which occurred in the wake of Foreign Secretary Boris Johnston’s resignation. He said he had second thoughts about the Prime Minister’s Brexit strategy. May GDP rose 3.0% which helped ease the pain from weaker than expected Manufacturing, and Industrial Production reports. GBPUSD traders are torn between heightened Brexit risks and improving economic data which should keep the currency in a 1.3200-1.3350 range in the near term.
USDJPY cracked above resistance in the 110.80 area and never looked back, rising to 111.28 in New York. The thaw in trade tension rhetoric, improved risk tone and higher US Treasury yields supported the gains. A break above 111.50 would extend gains to 112.75.
AUDUSD dropped following despite a Business Confidence report meeting expectations. Instead, broad US dollar strength undermined the currency pair as well as the New Zealand dollar.
Oil prices extended yesterday afternoons gains supported by an oil workers strike in Norway and supply disruptions in Venezuela, Libya and Canada. WTI oil is at the top of its $73.91-$74.41 overnight range
The Canadian dollar tracked broad US dollar moves. USDCAD climbed steadily, rising from 1.3104 to 1.3141 in New York trading. The Bank of Canada policy meeting is Wednesday and only Housing Starts, and Building Permits data are due today.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish while prices are above 1.3120, looking for a break of resistance at 1.3150 to extend gains to the 1.3190-1.3205 resistance area. A break above this level would suggest a short term bottom is in place and a retest of the 1.3385 peak, last seen on June.27. A break below 1.3120 targets support at 1.3050.
Today’s Range 1.3080-1.3150
