USDCAD open 1.3309-11 (6:00 am EST)    Overnight Range 1.3265-1.3313

A fresh bout of risk aversion sentiment made the Canadian dollar the worst performing G-10 currency since yesterday’s New York open.  Traders were unnerved by fears the US/China trade talks are going off the rails, US politics HK protests, dovish comments by Bank of Canada Deputy Governor Carolyn Wilkins, and soft oil prices.

The currency pair did not catch much of a break from the release of inflation data, this morning.  October Headline and Core CPI rose 1.9% y/y, as expected.  USDCAD drifted off its opening level but is still above the overnight low of 1.3265.

The Japanese yen is the only major currency to open with a gain today

FX Market Snapshot

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

Source: Saxo Bank/IFXA

USDCAD touched bottom yesterday, at 1.3190, following a soft, but better than expected September Manufacturing Shipments result (Actual -0.2% m/m vs forecast -0.6%). The details were soft, and USDCAD rebounded to resistance in the 1.3220-30 area.

Prices accelerated to 1.3270 after BoC Deputy Governor Wilkins speech which was considered dovish. She commented on the BoC’s ability to respond to a worsening global growth scenario. She said “Our policy interest rate may be relatively low now, but at 1.75 percent we still have room to manoeuvre. And, we have other options in our tool kit, such as extraordinary forward guidance and large-scale asset purchases.

USDCAD continued to rally and started today’s session at 1.3305, the overnight peak as risk aversion fears rippled throughout FX. Traders are concerned that the US Senate’s vote to pass the Hong Kong Human Rights and Democracy act would antagonize China enough to derail the trade talks completely. China complained to representatives of the US embassy in Beijing.

A steep drop in oil prices was another excuse to buy USDCAD, as well. West Texas Intermediate (WTI) oil prices tumbled from $57.01/barrel yesterday to $54.74/b overnight after the American Petroleum Institute (API) said US crude stock rose by 5.95 million barrels in the week ending November 15. Traders are concerned about rising crude supply in a falling demand environment.

Elsewhere, GBPUSD suffered after the results of the Leader’s debate was determined to be a draw, which some view as good for the Labour Party, increasing the risk of another “hung parliament.” GBPUSD dropped top 1.2889 from 1.2929.

EURUSD consolidate gains in a 1.1054-1.1079 range. Prices retreated from their peak after German October PPI data was weaker than expected (Actual -0.2% m/m vs September 0.1% m/m)

USDJPY inched higher in Asia but dropped from 108.57 to 108.36 by today’s New York open due to China/US trade concerns and a drop in 10-year US Treasury yields to 1.735% from 1.82%. they have since recouped their overnight losses.

The minutes from the October 30 FOMC meeting are released at 2:00 pm which should suggest tight FX ranges until then.

USDCAD Technical View

The intraday USDCAD technicals flipped to bullish.  Yesterday’s topside break of 1.3220 snapped the downtrend trend channel and the subsequent break above resistance in the 1.3270-80 zone, suggests a short term bottom is in place (1.3190)  A decisive break above 1.3320, the June downtrend line,  targets 1.3380 and then 1.3550. For today, USDCAD support is at 1.3270 and 1.3240.  Resistance is at 1.3320 and 1.3380.  Today’s Range 1.3270-1.3370

Chart: USDCAD daily

Source: Saxo Bank