A Bloomberg headline spooked FX markets and tanked the US dollar, just as New York traders were starting their day. Bloomberg wrote: “Bloomberg China Officials Are Said to View Treasuries as Less Attractive.”
EURUSD soared, rising from 1.1930 to 1.2010 in minutes with the rest of the majors following suit. There wasn’t any Eurozone economic data released.
Sterling was a big beneficiary of the Bloomberg headline. GBPUSD had collapsed from 1.3525 to 1.3481 after worse than expected UK trade data but the Bloomberg headline made traders forget about the data. GBPUSD rallied from 1.3481 to 1.3560.
Yesterday’s Bank of Japan decision to reduce long and super-long bond purchases undermined USDJPY. That trend continued overnight with USDJPY falling from 112.77 to 111.31.
The antipodean currencies were bouncing inside well-defined ranges until New York opened. Mixed China CPI and PPI data undermined the currencies. Broad US dollar weakness lifted AUDUSD from 0.7809 to 0.7865. NZDUSD climbed from 0.7142 to 0.7247.
Oil and Gold prices rallied. Oil prices got an added boost from yesterday’s end of day API report of an 11.19 million barrel decline in crude inventories. Traders are only expecting today’s EIA data to show a 3.8 million barrel decline.
Gold recouped all of its losses from Friday and is now at levels last seen in September.
The Loonie has been a bystander. Traders ignored soaring gold and oil prices as well as US dollar weakness and left USDCAD to bounce inside a 1.2432-73 range. The Bank of Canada is widely expected to hike rates by 0.25% next week. Traders are concerned that it could be another “dovish” increase. The nearly 0.0500 point drop in USDCAD since December 19 suggests the currency may have moved far enough.
It is another light data day in the US, leaving FX traders to seek direction elsewhere. That direction may come from Wall Street where equity futures are pointing to a lower open. There isn’t any Canadian data.
USDCAD Technical outlook:
USDCAD is attempting a counter-trend rally while prices are above 1.2420 and looking for a break above the downtrend resistance level of 1.2480 to extend gains to 1.2550. A break below 1.2420 targets 1.2360
Today’s Range 1.2380-1.2480