August 15, 2019

USDCAD Open (6:00 am EDT) 1.3315-18   Overnight Range 1.33287-1.3328

US Retail Sales surged in July, rising 0.7%, easily beating the forecast for a 0.3% gain. The Philadelphia Fed Manufacturing Survey was 16.8 compared to the forecast of 10. Survey noted that “The general activity, shipments, and employment indicators decreased from their readings last month, but the indicator for new orders increased. The survey’s future activity indexes remained positive, suggesting continued optimism about growth for the next six months.”

The 2-year-10-year US Treasury yields turned positive which may ease fears of a looming recession and help reverse some of yesterdays moves.

It was a bloodbath on Wall Street yesterday. The Dow Jones Industrial Average fell 3.05%, and the other major indices were close behind. Traders feared US Treasury yields were signaling a recession and selling beget selling.

The FX market was a tad less impressed. The usual safe-have currencies rallied, led by a 0.40% rise in the Japanese yen. The Swiss franc only managed a 0.08% gain. The Euro wasn’t a safe-haven currency at all. Instead, it was sold due to weak German and Eurozone data stoking recession fears. The Canadian dollar led the Commodity currency bloc lower, in part due to rising US crude oil inventories.

The US dollar opened in New York with tiny losses across the board compared to yesterday’s close. The major G-10 currencies continue to be trapped inside two-month trading bands, and although it is testing major support/resistance areas, it hasn’t broken out.

In Asia, AUDUSD popped to 0.6789 from 0.6748 after Australia’s employment report showed a forecast-beating 41,100 gain in jobs. (forecast 14,000) Unfortunately, ongoing concerns around US/China trade helped to cap gains. NZDUSD traded sideways in a narrow band.

USDJPY was whippy. Prices rallied from 105.75 to 106.05 in Asia. They spiked to 106.754 at the European open, coinciding with a jump in US 10 year Treasury yields to 1.593% from 1.547%. The move was fully reversed when Treasury yields moved lower.

GBPUSD is the best-performing currency, gaining 0.34% since yesterday’s close. Political drama is supporting the currency.  Labour Party Leader Jeremy Corbett wants other parties to support him to replace Boris Johnson, in a new effort to avoid a “no-deal” Brexit.  Better than expected UK July Retail Sales (Actual 0.2% vs forecast -0.2%) added to the gains.

EURUSD staunched the bleeding after yesterday’s weak Eurozone data and recession fears and consolidated losses in a narrow 1.1135-1.1153 range.

USDCAD is supported by “risk-aversion” sentiment leading to broad US dollar demand and a lack of Canadian economic data. However, domestic economic performance, a neutral -to-dovish Bank of Canada monetary policy and narrowing CAD/US interest rate differentials should limit losses

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while prices are above 1.3280, looking for a break above resistance at 1.3340 to extend gains to 1.3380 and then 1.3430.  A break below 1.3280 would suggest further 1.3180-1.3340 consolidation.  For today, USDCAD support is at 1.3305, 1.3280 and 1.3240.  Resistance is at 1.3320, 1.3340 and 1.3380.  Today’s Range 1.3260-1.3340

Chart: USDCAD daily

Source:  Saxo Bank