Overnight Range 1.3024-1.3132
NOTE: This chart represents gain (or loss) of G10 currencies vs. the US dollar from NY close-Jul 11 (4pm) to July 12 6:00 am PST
Yesterday’s US dollar rally has turned into today’s US dollar retreat, in a lively overnight FX session. USDCAD started out in Asia with a bullish bias and pressing against strong resistance in the 1.3150 area. Those buyers became sellers. USDJPY was drifting lower following Monday’s large New York gains. Risk aversion sentiment was already on the defensive after the S&P 500 posted another record close. News that Theresa May was acclaimed UK Conservative party leader and would become Prime Minister on July 13 was viewed as a “positive” as it speeds up the Brexit process. In addition, the Bank of England is expected to inject additional stimulus into the British economy with a rate cut expected within the next two months. GBPUSD added to its New York gains rising from 1.2996 at the New York close to 1.3186 by mid-morning in Europe.
This morning, the Bank of England’s Financial Policy Committee noted that the risk outlook had materially changed, post Brexit.
The shift in UK sentiment was only one part of the equation. Prime Minster Shinzo Abe has promised further stimulus following yesterday’s election result that gave his party a “super majority”. USDJPY extended gains from the New York close of 102.88 to a high of 103.90.
Oil traders forgot all about yesterday’s concerns of rising supply and diminished demand. WTI rose from a low of $44.53 in Asia to $46.14 as of 6:55 am, EDT. The falling dollar and profit taking were behind the move. In addition, Opec’s latest monthly report forecast a rise in global oil demand in 2017.
Elsewhere, the Permanent Court of Arbitration in The Hague ruled that there was no historical basis for China’s South China Sea claims. China didn’t attend the meeting and has already said that they will ignore the ruling.
Today’s US data releases are of the third tier variety and therefore unlikely to trigger trading activity. Instead, traders will focus on oil price swings and equity market moves. There isn’t any data from Canada.
USDCAD technical outlook
The intraday USDCAD technicals are bearish following the break below 1.3090 and 1.3060 and are now looking to extend losses through support at 1.3020 to 1.2935. A failure to break 1.3020 would suggest that the decline is merely a correction. A move above 1.3070 would lead to a retest of the 1.3135 peak.
For today, USDCAD support is at 1.3020, 1.2970 and 1.2930. Resistance is at 1.3070, 1.3110 and 1.3140.
Today’s Range 1.2990-1.3070
Chart: USDCAD hourly