President Trump dialed back the trade threat rhetoric with China at the G-20 meeting on the weekend.  That was the good news.  Then, on Monday, the aimed his tariff cannon at the European Union.  The US is threatening to levy $4.0 billion in tariffs on EU goods because of subsidies to European aircraft makers.  One step forward and another one back.

 Monday, Opec and Russia agreed to extend production caps for another nine months.  WTI oil prices climbed to a peak of $60.24/barrel before dropping to $58.37 on profit-taking and concerns about slowing demand.

The US dollar opened in Canada after the long weekend with gains across the board, fueled in part by the unwinding of some safe-haven positions following the resumption of the US/China trade negotiations and better than expected US ISM Manufacturing PMI data.  (Actual 51.7 vs forecast 51.0)  The Swiss franc was the biggest loser, shedding 1.15% from Friday’s close to today’s open.

In Asia, the Reserve Bank of Australia (RBA) cut the Overnight Cash Rate (OCR) to 1.00% from 1.25%, surprising no-one. RBA Governor Philip Lowe said that the “outlook for the global economy remains reasonable, Australian economic growth around trend was expected, employment growth was strong while inflation pressures were muted.  Some analysts trimmed their future rate cut forecasts from two to just one, after the statement.

USDJPY gains were capped in the 108.50 area due to the US threats of EU tariffs and the reversal of earlier US Treasury yields.  10-year Treasury yields touched 2.046% on the back of yesterdays stock market gains but dropped to 2.01% in Asia.

EURUSD was weighed down by the latest US trade threats, concerns around the EU appointments for top jobs including EC Commission President, ECB Parliament, and ECB President.  Eurozone PPI data was mixed.

GBPUSD slid to a low of 1.2608 in Europe, undermined by weaker than expected UK Construction PMI for June. (Actual 43.1 vs May 48.6)

USDCAD rallied on the back of broad US dollar strength and soft oil prices.  The currency pair continues to consolidate its recent losses inside a 1.3050-1.3150 band.  Traders are looking ahead to Wednesday’s Merchandise Trade data and Friday’s employment reports, both of which are expected to be on the soft side.

USDCAD Technical outlook

The intraday USDCAD technicals are bearish while prices are below 1.3150 which represents the downtrend line from June 20. It guards additional downtrend line resistance which comes into play at 1.3320.  For today, a break below 1.3105 targets 1.3080 and then 1.3050.  A break above 1.3150 will put 1.3220 in play.  Today’s Range 1.3080-1.3150

Chart: USDCAD  4  hour