November 19, 2017

USDCAD open 1.3203-07 (6:00 am EST)    Overnight Range 1.3205-1.3227

Fed Chair Jerome Powell’s summons to the White House for a “talking to,” and misgivings about the US/China trade talks made FX markets uneasy overnight.

The US dollar is directionless and trading sideways against the G-10 majors.  It recouped most of yesterday’s losses and opened a touch firmer this morning.   

FX Market Snapshot

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

The Fed issued a statement yesterday, saying “At the President’s invitation, Chair Powell met with the President and the Treasury Secretary Monday morning at the White House to discuss the economy, growth, employment and inflation.” It also said that Powell’s comments were consistent with his remarks at last weeks Congressional hearings. The statement closed by underscoring the Fed’s independence and saying politics do not determine policy.

A miffed Trump tweeted “At my meeting with Jay Powell this morning, I protested fact that our Fed Rate is set too high relative to the interest rates of other competitor countries. In fact, our rates should be lower than all others (we are the U.S.). Too strong a Dollar hurting manufacturers & growth!”

FX traders were a tad concerned about the US administration’s silence on China’s request for tariff rollbacks to facilitate a Phase1 trade agreement.

AUDUSD had a lively session. The RBA minutes were dovish, as expected. The Bank is ready to ease further if needed and noted concerns about the effectiveness of low rates.  AUDUSD dropped to 0.6783 from 0.6805 immediately and then rallied to 0.6822 as New York opened. NZDUSD dropped following comments from RBNZ Assistant Governor Christian Hawkesby, reiterating that the Bank will lower rates again, if needed. NZDUSD dipped but recovered as well.

USDJPY consolidated yesterday’s losses in Asia and then inched higher in Europe, trading in a 108.47-108.79 range. Yesterday’s break below 109.00 was precipitated by falling Treasury yields, and a bit of risk aversion from US/China trade talk disappointment.

GBPUSD zig-zagged in a 1.2947-1.2969 range overnight before dropping through the bottom in early New York trading.   Traders are cautious ahead of today’s UK Leaders debate,  scheduled for 2000 GMT.

EURUSD is grinding higher on the back of modestly bullish technicals, which target gains to 1.1120 while trading above 1.1150.

USDCAD opened at the bottom of its 1.3206-1.3228, overnight range, thanks to EURUSD strength and a bounced in the other commodity currencies. Statistics Canada releases September Manufacturing shipments (forecast -0.6% vs August 0.8%) The GM strike will be blamed for weak results.  BoC Deputy Governor Carolyn Wilkins speaks in Montreal, but she may not speak about monetary policy as that would Trump Mr Poloz’s “Fireside Chat” on Thursday.

Today’s US data calendar includes Building Permits and Housing Starts.

USDCAD Technical View

The intraday USDCAD technicals are bearish.  The currency pair is in a down-trending channel with prices sitting in the middle of the 1.3180-1.3220 band.  Hourly and 100-day moving average support is at 1.3200.  The long term uptrend line (form September 2017) comes into play in the 1.3070 area.  For today, USDCAD support is at 1.3200 and 1.3180.  Resistance is at 1.3220 and 1.3250.  Today’s Range 1.3180-1.3230

Chart: USDCAD 1 hour

Source: Saxo Bank