It is FOMC decision day. There is not a press conference scheduled, just the policy statement. The “storm” is likely to be a brief, light sun-shower due to very low expectations for today’s result. The FOMC is almost universally expected to leave interest rates and policy unchanged.
Yesterday afternoon, Bank of Canada governor Stephen Poloz delivered a somewhat hawkish speech. He justified the need for higher rates by saying the neutral rate was 2.5-3.5% and current rates were only 1.5 %. He said that forces restraining economic growth are fading.
Those remarks and a minor (pre-FOMC) profit-taking sell-off in the US dollar led to USDCAD trading with a negative bias in a 1.2805-55 range overnight.
The USDCAD 1.2550-1.2950 range will stay intact for the foreseeable future. Yesterday’s better than expected February GDP data surprised to the upside suggesting improving economic growth. Oil prices are well above $60.00/barrel and expected to trade firmly. The NAFTA talks appear to be grinding toward a new deal. The icing on the cake is that the BoC is in tightening mode. All of the above suggest a revisit to the bottom of the range.
However, the Canadian dollar does not trade in a vacuum. The US dollar is in demand, and bullish USDX technicals point to further gains ahead. The US/China trade spat, Middle East tensions, and a somewhat hawkish FOMC keeps the topside in focus.
Overnight, FX trading was subdued. AUDUSD and NZDUSD traded higher. Kiwi was supported by employment data while Aussie was lifted by better than expected Caixin China Manufacturing PMI data (Actual 51.1 vs forecast 50.9)
USDJPY consolidated in a 109.65-91 range supported by higher US Treasury yields, bullish technicals and the risk of a hawkish tweak to the FOMC statement
EURUSD traded sideways in Asia and popped to session highs in Europe following forecast-beating Eurozone Manufacturing PMI (Actual 56.2 vs forecast 56.0) Q1 GDP came in at 2.5%
Sterling bounced when April Construction PMI data was 52.5 and not the 50.5, predicted. GBPUSD rose from 1.3582 to 1.3662.
There isn’t much in the way of economic data in the US and nothing from Canada. Traders will bide their time until the FOMC statement is released at 2:00 pm EDT.
USDCAD Technical Outlook
USDCAD continues to bounce in a 1.2800-1.2900 range. The uptrend from September 2017 is intact while prices are 1.2370 while the downtrend from May 2017is in place below 1.2990.. For today, USDCAD support is at 1.2830, 1.2800 and 1.2770. Resistance is at 1.2860, 1.2890 and 1.2920
Today’s Range 1.2770-1.2860