May 7, 2019

USDCAD Open (6:00 am EDT) 1.3442-45   Overnight Range 1.3412-1.3472

The Trump administration has upped the ante in the trade talks with China.  US Trade Representative Robert Lighthizer said that existing 10% tariffs on $200 billion of Chinese imports will increase to 25% at 12:01 am Friday. The American’s accused China of reneging on previous trade commitments. China responded by saying they would not offer any concessions under threat of tariffs.

China has a point. The Trump administration doesn’t seem to bargain in good faith. Canada, Mexico and the US agreed to a trade deal, but the US is still tariff happy. The US announced 17.5% tariffs on imports of Mexican tomatoes, starting today.   US tariffs on Canadian steel and aluminum are in place.

The FX major currencies chopped about in relatively narrow ranges overnight and opened in New York little changed from Monday’s close.

AUDUSD outperformed, rising from 0.6984 to 0.7046 after the RBA left interest rates unchanged.  There was about a 40% chance of a rate cut which explains the spike in the currency.  The statement noted that risks were to the downside.  Traders ignored Retail Sales and Trade reports.

NZDUSD is unchanged at today’s open.  Traders expect the RBNZ to cut rates when Asia opens.

USDJPY traded in a narrow 110.56-110.84 range.  Safe haven demand for yen and lower US Treasury yields weighed on the currency pair.

EURUSD hovered around the 1.1200 area weighed down by fresh political concerns from Turkey. Turkish President Recep Erdogan annulled election results in Ankara because he believes there was “organized corruption.”  Coincidently, his party was on the losing side of the vote. USDTRY soared 2.45% on the news.

GBPUSD rallied, sank and opened in New York, unchanged from yesterdays close. Prices have since drifted lower on diminished hopes for a breakthrough in the  Brexit talks between the Conservatives and Labour.

USDCAD traded choppily.  Prices dropped to the session low in Asia, on the back of AUDUSD and NZDUSD gains and WTI oil prices trading at $62.47/barrel. The move was, and USDCAD climbed back 1.3472 in Toronto trading, supported by broad US dollar strength.

The Canada Ivey PMI index is expected at 53.0 (54.3 in March). Bank economists tend to dismiss this data, but surprise results tend to have a short term impact on prices.  The highlight of the US data is the JOLTS job openings which isn’t anything to get excited about.  FX traders are likely to stay close to the sidelines ahead of the China/US trade talks.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish while prices are below 1.3480 and looking for a break of support at 1.3410 to extend losses to 1.3370.  A break of 1.3370 targets 1.3330. A break above resistance in the 1.3480-90 area would lead to a test of 1.3520.  for today, USDCAD support is at 1.3410 and 1.3370.  Resistance 1.3480 and 1.3505.  Today’s Range 1.3410-1.3480

Chart: USDCAD 1 hour