May 23, 2019
USDCAD Open (6:00 am EDT) 1.3468-71 Overnight Range 1.3472
China/US trade talk atmosphere deterioration, European Union elections and political turmoil in the UK, spooked traders and fueled risk aversion trading overnight and for all this week. The Canadian dollar, the Antipodean currencies and the British pound added to losses from yesterday.
The FOMC minutes confirmed what many FOMC officials were saying; US rates aren’t going anywhere. Arguably, they were not as dovish as some analysts expected and they didn’t give any incentive to sell US dollars.
GBPUSD is center stage. Theresa May’s ministers are leaving like rats fleeing a sinking ship and speculation is that she will be the next to go. GBPUSD fell from 1.2665 to 1.2607 but bounced to 1.2640 in early New York trading.
EURUSD dropped alongside GBPUSD with weaker than expected German IFO and Markit Manufacturing PMI data giving it a helping hand. The IFO Current Assessment fell to 100.06 from 103.04, and Business climate dipped to 97.9 from 99.2. Manufacturing PMI dropped to 47.7.
USDJPY is being weighed down by risk aversion sentiment and lower US Treasury yields. The 10-year yield has dropped from 2.436 on Tuesday to 2.354 today. Dovish comments from Bank of Japan Deputy Governor Masayoshi Amamiya didn’t help.
Weaker commodity prices, US/China trade tensions, and “not as dovish as expected” FOMC minutes undermined AUDUSD and NZDUSD. Rate cut worries are adding to the AUDUSD negative outlook.
WTI oil prices extended yesterday’s losses. The EIA report that weekly crude inventories rose 4.74 million barrels, the dialing back of US/Iran warmongering and the lack of progress in the China//US trade talks overwhelmed concerns of a tightening supply if Opec extended production cuts to the end of the year. WTI traded at $63.60/barrel. on Monday and is trading at 60.40/b in New York this morning.
USDCAD plunged to 1.3367 yesterday when March Retail Sales beat expectations and rose 1.1%. However, as soon as traders realized that most of the gains were due to higher gasoline prices, USDCAD soared and closed at the session high of 1.3436. Prices continued higher overnight, supported by broad US dollar demand on risk aversion sentiment and the plunge in oil prices. Nevertheless, the price action is just noise inside the well-defined 1.3370-1.3520 range intact since April 23. A break either side is good for another 0.0100 points.
Today’s US data, which includes weekly Jobless claims, and New Home Sales, shouldn’t have a lasting impact on prices since the FOMC minutes confirmed a “steady as she goes” FOMC. Canadian Wholesale Sales for March will be a non-event
USDCAD snapped yesterday’s intraday downtrend when prices broke above 1.3420. A break above resistance in the 1.3480 area will extend gains to 1.3520. A break of this level targets 1.3670. Failure to break above 1.3520 means more 1.3370-1.3520 consolidation. For Today, Today’s Range: 1.3430-1.3520
Chart: 4 hour highlighting range