USDCAD Overnight Range 1.2875-1.2966                  

The US dollar failed to recoup much of yesterday’s losses in an overnight session that, compared to yesterday, was somnolent. And boy, yesterday’s FX market was one for the ages.

To recap, the day started with the US dollar in demand vs the majors except for Sterling and Yen. The Fed and the BoJ expressed concern over Brexit with the BoJ’s Kuroda alluding to G7 emergency plans to smooth markets.  Traders got spooked and the dollar was bid.  Oil prices were sliding.  USDCAD cracked above resistance in the 1.2990-1.3020 area and hit 1.3085.

Then it all changed. A report that a pro-Remain, UK Labour MP was murdered by a “leave” fanatic led to conclusions (as dubious as they may be) that the murder would galvanize support for the Remain side allowing them to prevail in next Thursday’s referendum.  Within the blink of an eye, dollar buyers became sellers, stop losses were triggered and the US dollar gains were erased.  USDCAD plummeted, falling from 1.3085 to 1.2901 in early Asia trading and that move occurred while WTI prices were falling out of bed.  WTI dropped from $48.70 to $45.82. Oil has since recovered and is back at $47.10/barrel

Britain has temporarily suspended Brexit campaigning which has given FX markets a reprieve for today. In Asia, the Japanese Finance Minister injected a bit of verbal intervention into markets which was mostly ignored.  The commodity bloc currencies have suffered whip-lash but falling commodity prices question the sustainability of the gains.

Canadian CPI (Actual 1.5% vs forecast 1.6%, Core Actual 2.1% vs. forecast 2.1, y/y) edged lower in May but had no real impact on the currency.

USDCAD long positions that have been built up over the past few days have gotten squeezed with the sudden drop from yesterday’s peak.  There could be additional follow-through selling into the close however it doesn’t make too much sense to get bearish at current levels.  The Brexit risks have not gone away.

USDCAD technical outlook

The intraday USDCAD technicals are bearish following the move below 1.2970 supported by this mornings dip through support in the 1.2890-1.2900 area which opens up a test of 1.2830.  A break above 1.2940 should lead back to 1.3010. The uptrend line from the June low has been broken. Fibonacci retracement of the May-June range suggests a test of 1.2735 is likely on a break of 1.2820.  For today, USDCAD support is at 1.2870 and 1.2820.   Resistance is at 1.2910 and 1.2940.

Today’s Range 1.2840-1.2940

Chart USDCAD Daily