USDCAD Overnight Range 1.3641-1.3795          

FX trading has been very choppy since New York opened. EURUSD has continued its one-way move higher while Sterling has been on a wild ride, post Bank of England meeting, thanks to governor Mark Carney’s speech.  Essentially, he told markets that the entire MPC was talking about rate hikes.  Traders have been looking for cuts.

The overnight oil rally, mostly on the weaker US dollar, has been curtailed. WTI was $32.47 at the start of the New York session and is now down to $31.84, which also served to lift USDCAD off its lows.

In Asia, the US dollar paused in its descent following a frantic New York day. However, any thoughts that a floor had been reached were dashed when Europe got started. EURUSD has climbed steadily and is currently trading at 1.1230.  Even Mario Draghi couldn’t stem the bullish tide. He reminded markets that the ECB would still add stimulus but his comments were ignored.

This weeks US dollar decline was triggered by greatly diminished expectations of US rate hikes. The FOMC statement noted concern about “global economic and financial developments…” and those concerns were expanded upon by Fed Vice Chair Stanley Fischer, on Monday, in what was considered a doveish speech. New York Fed Chair and FOMC voter, William Dudley was even more doveish on Wednesday.  He said that conditions have tightened since the December meeting. As of yesterday Fed Funds futures were pricing a mere 28% chance of even one US rate hike in 2016.  In December, the FOMC indicate US rates would rise to 1%, implying 4 moves.

Traders with stagnant long dollar positions held in anticipation of a series of US rate increases decided to bail.  In the FX version of “Whack-A-Mole”, every US dollar bid that popped up, was whacked and the further the dollar fell, the higher the intensity of selling. That’s when an orderly decline became a rout. In the past week, the US dollar has declined against all the G-10 and major emerging market currencies. The Canadian dollar got an added boost from the perception that the BoC is on hold and unlikely to cut rates any time soon.

It is shaping up to be a very busy day.  This mornings US Jobless Claims report was soft following the footsteps of Wednesday’s soft non-manufacturing ISM report. That news is keeping the US dollar under pressure except against the Canadian dollar.  USDCAD has recouped some of the overnight losses.  Oil price weakness will offset general US dollar weakness and leave USDCAD, for today, rangebound within the overnight band.

USDCAD technical outlook

The USDCAD technicals are bearish while trading below 1.3850 which was the uptrend line from the October rally and now targets the uptrend line from May 2015 which comes into play in the 1.3500-20 area. That area is being guarded by Fibonacci support at 1.3590 representing the 76.4% retracement level of the Dec-Jan./16 range.  The intraday technicals are bearish while trading below 1.3780.  For today, USDCAD support is at 1.3640, 1.3610 and 1.3580.  Resistance is at 1.3720 and 1.3770

Forecast Range for the day 1.3640-1.3740

Chart USDCAD 4 hour