B. B. King and Donald Trump complained “The thrill is gone.” Mr King was singing about a lover that did him wrong in 1969, while President Trump was complaining about Jerome Powell and the Fed.  At a fund-raiser, last Friday, Trump said he was unhappy with the Fed’s rate increases.  Those words were behind yesterday’s US dollar sell-off. 

He elaborated in a Reuters interview yesterday saying “I’m not thrilled with his raising of interest rates.  No, I’m not thrilled.  We’re at a – we’re negotiating very strongly – I don’t call it a trade war – we’re negotiating very powerfully and strongly with other nations.  We’re going to win.  But during this period of time, I should be given some help by the Fed.”

And perhaps to ensure he stirred up FX traders in an otherwise, slow news day he added; “I think China is manipulating their currency, absolutely.  And I think the euro is being manipulated also… And what they are doing is making up for the fact that they are now paying a lot for – hundreds of millions of dollars, and in some cases billions of dollars – into the United States Treasury – and so they’re being accommodated, and I’m not, and I’ll still win.”

The US dollar started sinking yesterday morning and continued to do so overnight losing ground against the G-10 major currencies except against the Japanese yen.  EURUSD and GBPUSD were oversold which contributed to the steepness of the respective rallies.

AUDUSD got an added boost from the release of the RBA minutes which suggested that the next interest rate move would be up, although that move wouldn’t occur until some time in 2019.

Arguably President Trump’s comments were merely the catalyst for traders to trim “overbought” US dollar positions in an otherwise, “no-news” day.  The Fed is independent and although the President can remove Mr Powell from office for “cause,” it would be messy as “cause” is not specified. 

USDCAD dropped in concert with the rest of the G-10 majors.  Fear of a Nafta collapse has taken a back-seat to broad US dollar weakness and led to weak long USDCAD positions getting stopped out on the break below 1.3040. There isn’t any data of note until tomorrow’s release of June Retail Sales.  The number is expected to be weak, due to payback from May’s robust report. Until then USDCAD direction will be dictated by broad US dollar moves.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish below 1.3070, supported by the break below 1.3040, looking for a move below support in the 1.2990-1.3005 zone to extend losses to the 1.2940-60 area.  1.2950 is also the 50% retracement level of the April-June, 1.2525-1.3385 range. If broken it puts the 61.8% retracement level (1.2860) in play.  For today, USDCAD support is at 1.3005, 1.2990 and 1.2960.  Resistance is at 1.3060 and 1.3105.

Today’s Range 1.2990-1.3060