April 10, 2019

US inflation rose higher than forecast in March which helped underpin USDCAD.  CPI rose 0.4%, beating the 0.3% forecast and February’s 0.2% result. The European Central Bank (ECB) left interest rates and monetary policy unchanged as was widely expected.

The emergency EU Summit meeting is today.  They are voting on whether to grant the UK another extension to article 50 starts around 12:00 noon EDT.   If the answer is “no”, the UK will leave on April 12 without a deal. However, the most likely scenario is that the UK will get a lengthy extension until the end of 2019 or sometime in 2020.

The FOMC minutes from the March 20 meeting are released today.  Traders will be looking for insight into the interest rate outlook after the dot-plot forecast changed from two rate hikes in 2019 to none.

The US dollar opened with small losses against the major G-10 currencies after a relatively quiet overnight session.  AUDUSD was the liveliest currency pair, rising from 0.7110 to 0.7149 after Deputy Governor Guy Debelle triggered a minor short squeeze when he gave a neutral speech contrasting slow GDP growth with strong employment. Better than expected Consumer Sentiment contributed to AUDUSD gains. 

GBPUSD climbed from 1.3048 to 1.3087 ahead of today’s EU meeting.  The prevailing wisdom is that a long article 50 extension is good for GBPUSD. Today’s UK economic reports were better than forecast led by a 0.2% rise in February GDP, m/m.  The looming EU meeting overshadowed the data.

WTI oil prices slid to $63.65/barrel yesterday morning and then climbed steadily back to $64.39/b overnight. Traders ignored the 4.09 million barrel crude inventory increase reported by API at the end of the day.  The focused on expected supply shortages from hostilities in Libya.

USDCAD tracked WTI oil prices.  Yesterday’s WTI price slide lifted USDCAD off its lows and took it to 1.3336 overnight. The US data gave the currency pair an added lift and prices touched 1.3343. However, USDCAD gains are limited as long as crude prices remain firm and the greenback stays on the defensive.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish while prices are below 1.3380, looking for a break of support at 1.3290 and 1.3250 to extend losses to 1.1350. A break above 1.3380 targets 1.3420.  For today, USDCAD support is at 1.3310 and 1.3290.  Resistance is at 1.3360 and 1.3380.   

Today’s Range 1.3310-1.3380