July 29, 2019

USDCAD open (6:00 am EDT) 1.3172-75           Overnight Range: 1.3160-1.3181

FX markets got off to a slow start in what should be a busy week. China/US trade talks resume today without great fanfare or even modest expectations for a break-through.  President Trump thinks so.  On Friday he said China would probably try to delay a trade deal until after the US elections.

GBPUSD opened in New York as the worst-performing currency against the US dollar.  UK Cabinet Minister Michael Gove said the government “was working on the assumption” of a “no-deal Brexit” which knocked GBPUSD for a loop.  Fears of a snap UK election rose due to the Conservative’s improvement in polls which also hurt.  GBPUSD dropped from 1.2383 to 1.2322.

EURUSD drifted lower, weighed down by bearish technicals, a dovish ECB monetary policy outlook and broad US dollar strength ahead of the FOMC meeting on Wednesday.  The short-term technicals suggest that while prices are below 1.1180, the door is open for a test of support at 1.050.

USDJPY traded in a narrow 108.43-63 range, underpinned by relatively stable US treasury yields and broad US dollar demand.  Traders ignored June Retail Sales data, (Actual 0.5% vs forecast 0.2%, previous 1.3% y/y) preferring to await Tuesday’s Bank of Japan policy meeting. Analysts expect the BoJ to leave rates, policy and guidance unchanged.

AUDUSD and NZDUSD were subdued, although both currency pairs are flirting with major support levels.  If AUDUSD breaks below 0.6850, it will target 0.6710.

FX traders ignored chatter that the US administration was openly discussing devaluing the US dollar.  Reportedly, Trade Advisor Peter Navarro advocated a devaluation.  It wasn’t a popular view.  Treasury Secretary Mnuchin told CNBC “I am not going to advocate a weak dollar policy near term as Treasury secretary.” Nevertheless, the fact that the US administration is even talking about weakening the greenback, should raise major concerns with US dollar bulls.

USDCAD climbed alongside the broad US dollar strength and bullish technicals targeting resistance at 1.3230.  Traders are looking ahead to Wednesday’s May GDP report (forecast 0.1% vs 0.3% in April)

The US and Canadian economic calendars are empty.  Trade action will be dictated by trade talk headlines and Wall Street.

 USDCAD Technical Outlook

The intraday technicals are bullish while prices are above 1.3150, looking for a break above 1.3190 to extend gains to 1.3230.  A break below 1.3150 suggests a drop to 1.3110.  Finboacci retracement analysis suggests that a move above 1.3230 (38.2% Fibo level of May-July 2019 range) will extend gains to the 76.4% retracement level of 1.3410. Today’s Range 1.3140-1.3220.

Chart USDCAD 1 hour