October 15, 2019

USDCAD open 1.3226-30 (6:00 am EDT)     Overnight Range 1.3223-1.3237

A lot of event risk came to a head over the weekend and yesterday.  President Trump scored a trade deal with China-sort of, Brexit is nearing a reality and Trump demanded a ceasefire between Turkey and Kurds in Syria, as well as levying sanctions against Turkish officials.

None of those developments provided a clear direction for the US dollar.  American’s and Canadians returned from the long weekend to find the US dollar higher against the major G-10 currencies except against the Japanese yen.

FX Market Snapshot

Change in currency value against the US dollar from New York close to New York open

President Trump touted the trade deal tweeting, “The deal I just made with China is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country. In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out. Thank you China!”

FX traders were underwhelmed.  It is not a deal; merely a part of the framework for a potential deal, which itself will only be a partial agreement, hence the term, Phase 1. Chinese officials were taciturn, warned against being overly optimistic.

AUDUSD and NZDUSD traders were disappointed, and both currency pairs were sold. Dovish details in the RBA minutes added to the AUDUSD selling pressure as did the lingering impact of soft Chinese trade data, released Monday.

USDJPY rose and fell in concert with US Treasury yields and disappointment between reality and the hype around the US/China trade deal.

GBPUSD opened in New York today unchanged from Friday’s close. However, it had an extremely volatile few days. Contradictory headlines boosted prices from 1.2646 to 1.2520 on Monday, then up to 1.2695 in London this morning before they dropped to 1.2610, just before the New York open. Prices rebounded to 1.2660 in early trading.   Headlines that EU Chief negotiator Michel Barnier said a deal was still possible boosted prices.  Other headlines saying Barnier claimed UK proposals not enough, knocked prices lower. UK employment data was ignored.

EURUSD traded rather quietly since Monday, except for a brief flurry of action in Europe, this morning. Prices danced in a 1.1005-1.1045 range while Brexit headlines rolled. German and Eurozone ZEW data were better than expected but weaker than September’s results.

Oil prices dropped alongside China’s soft trade numbers and on disappointment that the US/China trade update didn’t live up to its hype. WTI dropped from $54.89/barrel at Friday’s close to $52.44/b overnight.

USDCAD continues to bask in the glow of Friday’s better than expected employment report. The headline 53,700 gain far exceeded the forecast of 10,000, which at first glance was impressive. However, the bulk of the gains were self-employment and government hires. Nevertheless, the report gives the Bank of Canada a lot of room to leave rates unchanged at the end of the month.

USDCAD Technical View

The intraday USDCAD technicals show prices consolidating losses in a 1.3200-1.3230 range, albeit with downward bias while prices are below 1.3250.  Longer term, Friday’s price drop halted at 1.3180, right on uptrend line support from July, leaving prices in a 1.3200-1.3330 wedge.  A break below 1.3180 opens the door to 1.3000 while a break above 1.3330 targets 1.3530.  For today USDCAD support is 1.3200 and 1.3180.  Resistance is 1.3250 and 1.3290.  Today’s Range 1.3200-1.3260

Chart: USDCAD daily

Source: Saxo Bank