USDCAD Overnight Range 1.3975-1.4105  

There is nothing like the scent of a currency devaluation and the tremor from an H-Bomb test to send markets scurrying under risk aversion rocks. And that’s the story overnight.

China’s CNY fixing at 6.534 was 0.0145 points higher than yesterday, a signal that the PBoC wants a weaker currency. Then, what was thought to be an earthquake rippling through South Korea and Japan ended up just being North Korea’s Kim Jong-Un setting off a miniature H-bomb.

The Commodity currency bloc suffered the worst of the damage from the China/risk aversion rout led by the Aussie dollar.  Of the G-10 bloc, only yen posted a gain against the US dollar.

The Canadian dollar was hammered. USDCAD started climbing in early Asia and once 1.4010 gave way, soared to 1.4100 before taking a breather. However, the dip was shallow.   In addition to the China/Korea news, the Loonie continues to be vulnerable to weak oil prices, a weak domestic economy and rising US interest rates.

This morning’s ADP report posted a healthy 257,000 gain in private sector payrolls, far surpassing the forecast and re-energising those looking for another US rate hike in March. That means that they will scour the FOMC minutes this afternoon in search of a hint of the timing of the next rate move.

USDCAD technical outlook

The intraday USDCAD technicals are bullish.  The overnight break of resistance in the 1.3990-1.4110 area will revert to support below the intraday trendline which now sits at 1.4040.  A break below 1.4000 will lead back to 1.3950 and then 1.3890.  Above 1.4110 targets 1.4285 (Cad0/70 cents) and then 1.4500.

Forecasted Range 1.4040-1.4140

Chart USDCAD  1hour

CAD 6TH JAN