July 24, 2019

USDCAD open (6:00 am EDT) 1.3139-42           Overnight Range: 1.3127-1.3045

If Red Bull© truly gives you wings, the British pound may have drank a few can’s today.  GBPUSD soared from 1.2428 to 1.2521 on Boris Johnson’s first day as Prime Minister.  The rally certainly fits the mould of “sell-the-rumour, buy-the-fact,” as traders scrambled to protect short GBPUSD profits.  Some analysts suggest that GBPUSD downside is limited as the worst of the bad news is already priced into the currency level.  Other’s aren’t so sure because the economic pitfalls of a “no-deal” Brexit are tough to quantify.

EURUSD inched higher alongside the GBPUSD rally but its gains were limited ahead of tomorrow’s European Central Bank meeting and Mario Draghi press conference. Expectations for a dovish ECB statement tomorrow and a slew of weaker-than-expected economic reports continue to weigh on the single currency.  France, German and, Eurozone preliminary Market Manufacturing PMI for July were below forecasts giving EURUSD a negative bias in a 1.1128-1.1154 range.  Making matters worse for Germany was news that Daimler posted its first quarterly loss since 2009 while Deutsche Bank lost €3.15 billion in the latest quarter. 

USDJPY drifted lower in a narrow 108.00-108.26 range in Asia and Europe but recovered all of the losses by the New York open.

AUDUSD got knocked lower after CBA PMI data missed forecasts.  But what really hurt was Westpac Bank’s call that the Reserve Bank of Australia would cut by 0.50% by early next year.  The move is necessary so that the RBA could meet its targets for the jobless rate and wage growth. Traders ignored news that New Zealand’s trade deficit narrowed and NZDUSD traded lower alongside AUDUSD

Oil prices rose after the American Petroleum Institute said US crude inventories declined by 10.961 million barrels in the week ending July 19.  It should be noted that summer is “driving season in the US, so inventory drawdowns are the norm.

Face-to-face US/China trade talks are slated to resume on Monday, but the story didn’t have much impact on FX trading.  Instead, traders were a tad nervous about news that South Korea fired over 300 rounds at a Russia A-50 command and control plane, saying it had violated their airspace.  Russia denies the claim, but Japan said it was true.  Japan and South Korea are embroiled in a trade spat as well.  Back in the day, these events would have led to a stampede into safe-haven currencies.  Today, not so much.  However, the news helped drive gold prices higher.  XAU rose from $1,416.65 to $1,426.04/oz

USDCAD traded with a bit of a bid in a quiet overnight session, but retraced those losses in early New York trading as it tracked broad US dollar moves.   There aren’t any Canadian economic reports available today.

Today’s US data includes New Home Sales and the usually ignored preliminary Markit Manufacturing PMI data.  (Traders prefer the ISM Manufacturing PMI report)

USDCAD Technical Outlook

The intraday technicals are bullish while prices are above 1.3130, looking for a move above 1.3160 to extend gains to 1.3250.  A break below 1.3120  argues for a retest of support in the 1.3060-90 zone. Today’s Range 1.3110-1.3180

Chart: USDCAD 4 hour