Overnight Range 1.3120-1.3163 

The Canadian dollar managed to hang on to almost all of yesterday’s “keystone XL” gains. President Tweet’s Trump’s  tweet that the Keystone Pipeline construction could begin (after a bit of renegotiation) drove USDCAD from 1.3294 to 1.3104 on Tuesday. The overnight session was spent consolidating that move. USDCAD started the New York session with an offered tone and is currently trading below the 200 day moving average, setting the stage for deeper losses today.

AUDUSD got hammered in early Asia trading following the release of a weaker than expected inflation report. Q4 RBA trimmed mean CPI was 1.6% vs. forecast of 1.7%, y/y and that opened the door for rate cut expectations, perhaps as early as May.

AUDUSD dropped from 0.7596 to 0.7516 on the news.  It has since recouped half of those losses and opened in New York at 0.7550. Kiwi dipped along with Aussie but the move was shallow and  NZDUSD has recovered all of those losses.

USDJPY peaked at 113.98 in early Tokyo trading and dropped to 113.39. on better than expected trade data.  Japan recorded a trade surplus of 4.04 trillion yen (US$42.4 billion) for the first time in 6 years. That move quickly ran out of steam and USDJPY see-sawed inside a 113.37-113.79 band as New York traders came in.

EURUSD ignored soft German IFO readings as they are still at elevated levels.  The improved risk sentiment tone evident in rising equity indices helped to lift EURUSD from 1.0712 to 1.0754 where it sat at the New York open.

Sterling bears are getting their heads handed to them. Theresa May’s speech last week served to dispel a lot of uncertainty around how the Brexit negotiations would proceed. Short GBPUSD positions continue to get squeezed. The break of minor resistance at 1.2550 in London drove GBPUSD to 1.2598 before it inched back.

Oil prices are under pressure. The American Petroleum Institute reported a 2.04 million barrel rise in US crude inventories yesterday and Libya is forecasting oil production to rise from 750,000 barrels per day to 1.25 million b/d by the end of 2017. That news, combined with the Keystone XL pipeline, news will keep global supply concerns at the forefront.

Donald Trump has tweeted “Big day planned on NATIONAL SECURITY. Among many other things, we will build the wall.” That tweet is a warning that FX markets are vulnerable to vicious US dollar price swings on ever changing risk sentiment. Traders are staying close to home, unwilling to get caught wrong-sided on a “tape-bomb” move, which has exacerbated volatility. The US data cupboard is almost bare. Only the Housing Price Index and the weekly EIA Crude stocks change reports are due. A rise in Crude stocks coupled with the Libya’s production increase and the Pipeline news could be nasty for oil prices.

Overnight Ranges

25-Jan-17

 

Open

High

Low

USDCAD

1.3129 1.3163 1.3120

EURUSD

1.0753

1.0754

1.0712

USDJPY

113.56

113.98

113.39

GBPUSD

1.2580

1.2596

1.2492

USDCHF

0.9985

1.0025

0.9981

AUDUSD

0.7550

0.7596

0.7516

NZDUSD

0.7256

0.7258

0.7225

WTI 52.59 53.06

52.59

Close 4:00 pm EDT-Open 6:00 am EDT

USDCAD Technical outlook:

The intraday USDCAD technicals are bearish following yesterday’s break of support at 1.3190 which will revert to resistance. Support in the 1.3000-1.3010 area is being tested and if breaks. Further losses to 1.3000 are likely.  A break below 1.3017 (50% Fibonacci retracement of May-November 2016 range targets the 61.8% level of 1.2883.  For Today, USDCAD support is in the 1.309010 area and then 1.3040.  Resistance is at 1.3190 and 1.3240.

Today’s Range 1.3040-1.3140

Chart: USDCAD Daily with Fibonacci