November 28, 2019

USDCAD open 1.3292-96 (6:00 am EST)    Overnight range 1.3280-1.3297

A wave of risk aversion sentiment rippled through markets overnight, sparked by President Trump signing the “Hong Kong Human Rights and Democracy Act of 2019.”  The news shouldn’t have been a surprise.  The Senate passed the bill on November 20, with a 417-1 vote.  It was China’s threat of “counter measures” and the impact on the trade talks, that spooked markets..

Asia equity indices, European bourses, oil prices and the commodity bloc currencies opened modestly lower in Toronto today.

FX Market Snapshot

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

Source:  Saxo Bank/IFXA

GBPUSD extended yesterday’s gains, rising from 1.2912 to 1.2949, on an election poll predicting a large Conservator majority (YouGov MRP: Conservatives 359, Labour 211, SNP 43, LD 13, Plaid 4, Green 1). Prices may have got an extra boost from higher than expected November Housing Prices and a bit of GBPUSD demand for month-end portfolio rebalancing.  GBPUSD recovered all of its overnight losses in early Toronto trading.

EURUSD managed to stay above support in the 1.1000 area and traded in a 1.1003-17 range.  Eurozone economic data was mixed to soft. November Business Climate Index was worse than expected -0.23, which was offset by Eurozone Services Sentiment rising to 9.3 from 9.0. The rally faded, and prices returned to the overnight low, in Toronto trading.

USDJPY recouped most of its HK bill risk aversion losses and is trading at 109.45 in Toronto, just below its closing level of 109.54. Prices are supported by a bounce in US 10-year Treasury yields which climbed to 1.76% from the Asia low of 1.74%.

AUDUSD sank on the back of risk aversion, and the move was exacerbated by a modestly weak Private Capital expenditure report. Prices dropped from 0.6777 to 0.6760. NZDUSD drifted lower, as well but managed to outperform its Aussie cousin.

Oil prices dropped on the back of profit-taking and the rise in risk aversion sentiment. Also, analysts forecast that Opec will not announce new production cuts but just extend the existing quotas.

USDCAD traded higher due to the renewed risk aversion sentiment, but gains were limited due to the still-firm oil prices and the proximity to resistance in the 1.3310-25 area.

Today’s US thanksgiving holiday points to a tranquil Toronto session, exacerbated by a lack of economic data.  The Canada Current Account deficit is expected to increase from 6.3 billion to 9.0 billion.

USDCAD Technical View

The intraday USDCAD technicals turned bearish with the failure to break above 1.3330.  Today, the intraday downtrend line comes into play at 1.3310 and while below that level, targets the 10 day bottom in the 1.3250-60 area. For today, USDCAD support is at 1.3250 and 1.3210.  Resistance is at 1.3310 and 1.3330.  Today’s Range 1.3260-1.3310

Chart:  USDCAD  30 minute

Source: Saxo Bank