It’s official. Environment Canada said that the first day of summer arrived at 9:24 pm PDT. It arrived three hours later in Ontario and EDT zone.
FX traders marked the milestone and bought Sterling. Not really, the GBPUSD buyers didn’t emerge until just after the start of the New York session. That’s because the Bank of England chief Economist Andy Haldane said that he would vote to hike interest rates. That makes four Monetary Policy Committee (MPC) members on the rate hike bandwagon and four against. In reality it is till only three as one of the “hawks”, Kirsten Forbes will not be a MPC member at the next vote.
GBPUSD roared, rising from 1.2590 to 1.2708 (where it is sitting), snapping a two-week downtrend line in the process.
Prior to the Sterling drama, the oil market was the focus. Weak oil prices turned global equity indices red and knocked the commodity bloc currencies for a loop. The 5.3 percent fall in WTI prices between Monday and Tuesday, talk of a “bear” market and rampant skepticism that Opec production cuts can offset rising production elsewhere are behind the move.
Oil and lower US Treasury yields put USDJPY on the defensive. Prices edged lower from 111.48 and opened in New York at 111.08. Since then, USDJPY has recovered all its overnight losses and is trading above the overnight high.
Yesterday’s lower than expected GlobalDairyTrade auction drove NZDUSD to 0.7218 from 0.7248 The entire decline was erased in European trading. AUDUSD traded in a similar fashion
EURUSD has been a sea of tranquility. Prices have remained inside a narrow 1.1128-1.1154 range. The tug of war between a doveish Draghi and a hawkish Fed and lack of top tier economic data have left traders scratching their heads.
USDCAD has struggled to rally despite the fall in oil prices. That’s because traders are weighing the risk of a Canadian interest rate hike against the possibility that the oil price decline may have run its course.
The debate is not over. This morning the EIA weekly crude stocks change report is due. A larger than expected decline in inventories is needed to underpin WTI prices.
USDCAD Technical outlook:
USDCAD is modestly bid inside the post-BoC policy shift range of 1.3165-1.3310. A break above 1.3310 would extend gains to 1.3380 which is guarding the downtrend line from May 4 which comes into play at 1. 3470. For today, USDCAD support is at 1.3240 and 1.3190. Resistance is at 1.3310 and 1.3380
Today’s Range 1.3240-1.3310
Chart: USDCAD 1 hour