September 20, 2019

USDCAD Open (6:00 am EDT) 1.3265-69        Overnight Range 1.3257-1.3292

USDCAD popped higher after Canada July Retail Sales data were below forecast, rising from 1.3268 to 1.3291.   Retail Sales rose 0.4% compared to the 0.6% predicted.  However, they were still far better than June’s revised lower result of -0.1%.  Stats Canada said “Sales in the retail trade sector advanced for the first time in three months, increasing 0.4% in July to $51.5 billion. Higher sales were reported in 6 of 11 subsectors representing 71% of retail trade.

After removing the effects of price changes, retail sales in volume terms were essentially unchanged in July.

The US dollar is ending the week on a high note, posting gains against the major currencies except against the Japanese yen.

FX Market Snapshot

Change in Currency value vs the US dollar-   NY close 13Sep19  to 20Sep19 5:45 am PDT

St Louis Fed James Bullard justified his FOMC voting dissention in a blog post on the website.  He said, “In my view, lowering the target range by 50 basis points to 1.50%-1.75% would have been a more appropriate action.”  His reasons were: First, there are signs that U.S. economic growth is expected to slow in the near horizon. Trade policy uncertainty remains elevated, U.S. manufacturing already appears in recession, and many estimates of recession probabilities have risen from low to moderate levels. Moreover, the yield curve is inverted, and our policy rate remains above government bond yields for nearly every country in the G-7. Second, core and headline personal consumption expenditures (PCE) inflation measures continue to run some 40 to 60 basis points, respectively, below the FOMC’s 2% inflation target.  FX markets ignored his comments.

GBPUSD was rather active overnight and has fully retraced yesterday’s gains. GBPUSD bounced in Asia as traders there bought into reports that the EU and UK were making progress on a Brexit agreement.  Prices jumped yesterday after Boris Johnson said, “progress was being made” and EU President Jean-Claude Juncker said, “a deal was achievable.”  However, the Irish Deputy Prime Minister contradicted that claim saying “we are not even close to a deal.” GBPUSD hit 1.2581 in Asia and then toppled to 1.2482 in New York trading.

EURUSD climbed in Asia and retreated when Europe opened. Prices dropped from 1.1066 to 1.1041 due to profit-taking and weaker than expected German August PPI data. (Actual-0.5% vs forecast -0.2% m/m)

USDJPY dipsy-doodled in a 107.78-108.07 range. Prices tracked broad US dollar movements and US 10-year Treasury yield price action. Yields closed near session highs which underpinned the currency pair.

NZDUSD traded lower in part because of renewed fears that the RBNZ will cut rates at next weeks policy meeting. NZDUSD dropped from 0.6303 to 0.6268

USDCAD Technical View

USDCAD upside momentum continues to wane and while prices are below 1.3310, the risk is for a break of support at 1.3240 to extend losses to 1.3170. A rally above 1.3310 still needs to crack resistance in the 1.3340-80 area to get US dollar bulls excited.  For today, USDCAD support is at 1.3230 and 1.3210.  Resistance is at 1.3310 and 1.3340.  Todays Range 1.3260-1.3330.

Chart: USDCAD daily

Source: Saxo Bank