May  24, 2019

USDCAD Open (6:00 am EDT) 1.3456-59   Overnight Range  1.3447-1.3480

UK Prime Minister Theresa May announced her resignation effective June 7.  A leadership convention begins the following week and the current odds on favorite to replace her is Boris Johnson. to replace her is Boris Johnson

Is this the future look of Commonwealth Prime Ministers?

Sterling traders don’t know what to make of the news.  GBPUSD rallied from  1.2667 to 1.2708, dropped down to 1.2659 and then rallied again, reaching 1.2718 in early New York trading.  Prices were underpinned by better than expected April Retail Sales (Actual 5.2% y/y vs forecast 4.2%, although the result was still below the March level.  A break above 1.2740 may extend gains to 1.2810.

Overnight, FX markets traded sideways within narrow ranges.  AUDUSD traded lower after Westpac predicted three RBA rate cuts in 2019.  Prices rebounded during the European session, post-May’s resignation.  USDJPY recovered all of its Asia losses in European trading and prices were bid at the New York open.

EURUSD has been choppy inside a 1.1178-1.1204 since Europe opened and is targeting further gains to 1.1240 on a break above 1.1210.  There wasn’t any European data of note.

The US Commerce Department is planning anti-subsidy duties on products from countries that undervalue their currencies.  China, are you listening?

Oil traders trimmed positions this week.  WTI dropped from $63.65/barrel on Monday to $57.26 yesterday, before bouncing to $58.71 overnight.  Rising US inventories, the risk of a prolonged US/China trade war, an easing of Iran/US tensions and profit-taking triggered the sell-off.

USDCAD rejected another attempt to trade above 1.3500 yesterday and prices consolidated in a 1.3448-1.3480 range overnight, opening this morning at the bottom of the range. Traders are biding their time until Wednesday’s Bank of Canada policy meeting.   The domestic economy is recovering as anticipated by the BoC but not enough to change its policy stance, especially in light of the US/China trade talks impasse.  They would be loathe to do anything that strengths the Canadian dollar, while the competition (AUD, NZD) are easing rates and weakening their currencies.

US Durable Goods Orders are expected to be unchanged at 0.2% while the ex-transportation component is forecast at -0.2% compared to March’s 1.3% increase.  Better than expected results will boost the US dollar.

The afternoon session may be quieter than usual as many US traders will try to get an earlyu start to the Memorial Day long weekend.

USDCAD Technicals

USDCAD continues to bounce between 1.33750 and 1.3525 with a bullish bias steeming from the intact uptrend line that has been in place since October 2018 and comes into play at 1.3290.  The intraday technicals are bearish while prices are below 1.3470 with a break of 1.3420  targeting 1.3370.  Today’s Range 1.3410-1.3480

Chart: USDCAD daily