USDCAD Range 1.3115-1.3210
USDCAD touched 1.3210 in Asia, hovered around 1.3200 throughout the European session and collapsed in early New York trading on a combination of soft ADP employment data and a surprisingly strong Canadian Merchandise Trade report. June exports soared 7.1% and the trade deficit declined to a mere $500 million from the May deficit of $3.34 billion.
There is no doubt that the Canadian data is strong which suggests that maybe the expected recovery in the 2nd half isn’t a fantasy but a real possibility. Having said that, USDCAD isn’t trading like anyone actually believes that a Canadian recovery is close. The drop from 1.3180 to 1.3115 was more a factor of weak long dollar positions getting squeezed than anything else.
The Asian session saw a continuation of the New York afternoon US dollar strength due to The Wall Street Journal’s story that Atlanta Fed President, Lockhart, a doveish, but non-voting member of the FOMC turned hawkish and championed a rate hike in September.
The European session was quieter. Perhaps those traders weren’t nearly impressed with Lockhart’s comments as everyone else. He has said similar things before and there are still two NFP reports ahead of the September FOMC.
Today’s softer than expected ADP data may temper bullish NFP calls and lead to a bit of US dollar profit taking. If so, USDCAD will likely consolidate within a 1.3050-1.3200 range.
Technical Outlook
The intraday technicals are bearish following the retreat from 1.3210 and the subsequent break of minor support at 1.3150. A break below 1.3100-10 would lead to a test of 1.3050. Meanwhile, the short term uptrend is still intact while trading above 1.3000. For today, USDCAD support is at 1.3110, 1.3080 and 1.3050. Resistance is at 1.3160 and 1.3210
