The final US Q1 GDP report saw growth drop to a still robust 2.0% but since the data is quite stale the impact on FX was muted. However, US equity futures suggest a negative opening. If the day finishes with more losses, it could trigger US dollar demand for portfolio rebalancing purposes. The US dollar is trading higher across the board in early trading.
It was a different story overnight. The FX majors traded sideways inside narrow ranges. Traders are on edge due to trade tensions, EU/Brexit talks, and cautious with month end and quarter end portfolio rebalancing flows waiting in the wings.
Yesterday was ending in Toronto, when Bank of Canada Governor Stephen Poloz held a press conference after a speech in Victoria, BC. Traders have concluded the remarks were hawkish. USDCAD jumped to 1.3384 from 1.3282 when the text of his speech was released. Prices declined to 1.3324 after the press conference, traded sideways in Asia and Europe and resumed their downtrend in early New York trading. USDCAD is currently dipped to 1.3276 in Toronto trading but is currently at 1.3305.
In his press conference, the governor noted that the BoC’s models showed a myriad of economic outcomes when tariffs were applied to specific industries, making the net effect difficult to predict. However, the implication is that tariffs bring higher prices and higher prices are inflationary.
The Reserve Bank of New Zealand left interest rates unchanged (as expected) and issued a somewhat dovish statement. NZDUSD dropped from 0.6805 to 0.6754. It has recovered somewhat and is trading at 0.6775. AUDUSD traded in a similar fashion, but its moves were tied to general US dollar sentiment.
USDJPY tracked higher until peaking at 110.40 in Europe. However, risk aversion fears should cap gains in the 110.60 area.
EURUSD bottomed out at 1.1528 in Europe and climbed steadily. It peaked at 1.1600 after the US GDP data but quickly dropped to 1.1555. Eurozone data did not play much of a role
Sterling traded softly in a 1.3067-1.3118 range. Prices are weighed down by ongoing EU/Brexit talks and it is hovering at 1.3061 in New York.
Oil prices rallied, and WTI traded at $72.94/b, after today’s US data. Prices are supported by fears that Iran sanctions will create shortages.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish while prices are above 1.3265, looking for a break of 1.3330 to extend gains to 1.3380 and then 1.3450. A move below 1.3265 will lead to 1.3150 and imply a period of consolidation in the 1.3150-1.3380 area. For today, USDCAD support is at 1.3270 and 1.3230. Resistance at 1.3330 and 1.3380
Today’s Range 1.3270-1.3360
