USDCAD Open (6:00 am EDT) 1.3503-06 Overnight Range 1.3491-1.3525
.The circus that is the Trump administration landed in London this morning to the usual British pomp and Trump’s tweets. The President took exception to criticism from the Mayor of London to and responded with insults of his own. The British kept a stiff upper lip and markets didn’t care.
FX markets closed out May in full risk aversion mode The circus that is the Trump administration landed in London this morning to the usual British pomp and Trump’s tweets. The President took exception to criticism from the Mayor of London to and responded with insults of his own. The British kept a stiff upper lip and markets didn’t care The Japanese yen rose 2.83% between the April 30 New York close and the May 31, close. The Swiss franc was the only other G-10 major currency to rise, and it gained 1.8%. Sterling was the biggest loser, down 3.1% for the month and that had more to do with rising “no-deal” Brexit risks than global risk aversion. The New Zealand dollar led the commodity currency bloc down thanks to rate cut fever and US/China trade tensions. The Canadian dollar lost 0.94% thanks to declining oil prices, a dovish Bank of Canada monetary policy stance and broad US dollar demand.
US/China trade tensions dominated trading in May, and they will continue that trend in June. China released a White Paper on the state of the trade talks. It said: 1) “Economic and trade friction provoked by the US damages the interests of both countries and of the wider world” 2) “China’s technological innovation is based on self-reliance. Accusing China of intellectual property theft and forced technology transfer is utterly unfounded.” 3) “The Chinese and American economies are interlinked, and bilateral trade and investment are mutually beneficial” 4)” The trade war has not “made America great again” 5) “US trade bullying harms the world.” 6) “The US has backtracked on its commitments in the China-US economic and trade consultations”
The comments were expected, but global equity indices still traded lower while the US dollar opened in NY, very close to where it closed on Friday.
In Asia, USDJPY dropped from 108.29 to 108.08 due to ongoing safe-haven selling and on the back of falling US Treasury Yields. The US 10-year Treasury yield fell to 2.081 from 2.133 before recovering to 2.10 in early New York trading. Bank of Japan Governor Kuroda said the BoJ would continue easing to support economic growth and inflation.
AUDUSD and NZDUSD were underpinned by better than expected China Caixin Manufacturing PMI data, which was 50.2 in May. (forecast 50.0) New Zealand was closed for a holiday.
EURUSD drifted higher. Markit Manufacturing PMI was as expected (47.4) in part because Italy said it would seek a compromise with the EU on budget talks.
GBPUSD traded choppily in a tight 1.2622-59 range and is trading in the middle of that range in New York, despite weaker than expected Manufacturing PMI data for May. (Actual 49.4 vs forecast 52.0) Traders are more concerned about UK politics than economic data with Trump providing the entertainment.
Oil prices plunged in early Asia trading, falling from $53.37 to $52.15/barrel following the escalation of trade tensions involving Mexico and China, and China’s White paper response. Prices got a bit of support after Saudi officials said they would do what was needed to sustain market stability and rallied to $54.15/b in New York trading.
USDCAD is consolidating Friday’s losses following the better than expected March GDP result. Canada GDP rose 0.5%, which suggests the BoC was correct in suggesting earlier economic weakness was temporary. The decline from 1.3560 on Friday found a bottom above support at 1.3470 and bounced to 1.3525 in Europe. The US dollar came under renewed pressure in early New York trading and coupled with the rebound in WTI prices, has pushed USDCAD to 1.3492 to start the day.
Today’s US data includes; ISM Manufacturing PMI for May(forecast 53.0 vs previous 52.8) and construction spending. The Canadian calendar is empty.
The intraday techincals are bearish below 1.3520 looking for a test of support at 1.3470 to break and extend losses to 1.3430. A move above 1.3520 suggests further upside to 1.3570. Longer term, USDCAD needs to break support at 1.3400 to neate the uptrend that has been intact since the end of February.. For today, USDCAD support is at 1.3470 and 1.3430. Resistance is at 1.3520 and 1.3570. Today’s Range 1.3470-1.3530