June 14, 2019

USDCAD Open (6:00 am EDT) 1.3334-37 Overnight Range 1.3326-1.3352

The ongoing US/China trade dispute is supporting the US dollar.  So is domestic economic data. US May Retail Sales, both headline and core rose 0.5% while headline April data was revised higher.  The greenback rallied on the news adding to its overnight gains.

The US dollar opened in New York on a firm footing.  Cross-the board gains against the G-10 currency majors except for the “safe-haven” Japanese yen, were powered by weak China Industrial Production in May (Actual 5.0% vs April 5.4%) which was the lowest reading since 2002 and it was blamed on US tariffs.  The impressive 8.2% rise in May Retail Sales was ignored.  Traders were also concerned about a prolonged trade war after National Economic Advisor Larry Kudlow admitted there weren’t any formal plans for a Trump/Jinping meeting at the G-20.

The Canadian dollar outperformed its Antipodean peers, garnering a bit of support from oil supply concerns.  WTI oil is trading erratically in a $50.80-$53.35/barrel range and is hovering just below the middle of that range in early New York trading.  Traders fear an escalation of US and Iran hostilities which could disrupt crude shipments through the Strait of Hormuz.    US Secretary of State Mike Pompeo says the US has video proof of Iran’s involvement. Iran denies having any involvement.  Sceptics recall former US Secretary of State Colin Powell, citing “weapons of mass destruction” for justifying the US attack on Iraq.   The weapons, like lightsabers, were products of someone’s imagination.

Crude prices are also supported by the International Energy Administration (IEA) monthly report which trimmed its forecast for 2019 oil demand growth by 100,000 barrels per day.  The IEA forecasts weaker demand in 2020 and non-Opec production.

AUDUSD and NZDUSD were under pressure in Asia following the weak China data and fading risk appetite.  USDJPY traded with a negative bias due to safe-haven flows and a drop in US Treasury yields.

EURUSD drifted lower, pressured by rising fears of ECB easing to combat slowing eurozone growth and increasing trade tensions.

GBPUSD dropped to 1.2635 from 1.2680, in part because of increased risks of a “no-deal” Brexit, exacerbated by the rising odds that Boris Johnson will be the next UK Prime Minister.

USDCAD downside support in the 1.3250-70 zone was tested, and it held, in part because of increased risk for the Bank of Canada to follow in the footsteps of the other major G1-0central banks and cut interest rates. Canada has a trade war with China as well, and it is getting hurt, with exports of meat, pork, and canola negatively affected.  China President Xi Jinping won’t even take Trudeau’s calls, which suggests this conflict could last longer than the US/China dispute. Lower Canadian interest rates, slowing economic growth and a trade war with China suggests further USDCAD gains to 1.3550 and higher, are likely.

Michigan Consumer Sentiment (forecast 98 vs previous 100) is on tap. The Canadian calendar is empty.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while above 1.3300 looking for a break of resistance in the 1.3360 area to extend gains to 1.3380 and then 1.3430  For today, USDCAD support is at 1.3310 and 1.3280.  Resistance is at 1.3360 and 1.3420. Today’s Range 1.3310-1.3405

Chart: USDCAD  daily