May 16, 2019
USDCAD Open (6:00 am EDT) 1.3408-11 Overnight Range 1.3403-1.3448
Elevated China/US trade tensions show no signs of easing. President Trump declared a national emergency, (the same as he did with Canadian steel) which bars US companies from using telecommunications equipment made by, among others, Huawei Technologies. China responded by saying it will take steps to safeguard the rights and interests of its businesses. Then they formally arrested (previously just detained) two Canadians and charging them with espionage.
Risk aversion trading dominated Asia FX but not so much in Europe. USDJPY dropped in response to the earlier weak US data and a drop in US Treasury yields. It fell from 109.59 to 109.35 before rebounding to 109.65 in New York.
AUDUSD sank following a mixed employment report but recovered all its losses by the New York open. Australia added 28,400 jobs (forecast 14,000) but saw a bump in the unemployment rate to 5.2% from 5.1%. A bounce in commodity prices underpinned the currency pair in Europe. NZDUSD rallied alongside AUDUSD, during the European session.
EURUSD traded in a narrow 1.1202-23 range and was supported by somewhat hawkish comments by Deutsche Bundesbank President Jens Weidmann arguing for policy normalization.
GBPUSD is trading at its overnight low of 1.2820, extending the plunge that began on Monday, on the rising risk of a “no-deal” Brexit. Fibonacci retracement projects a drop to 1.2622 on a break of 1.2766, the 61.8% Fibonacci retracement level of the January -March range.
Oil traders ignored yesterday’s EIA data reporting US crude inventories rose 5.4 million barrels in the week ending May 10. Instead, they were more concerned about the risk of supply disruptions due to elevated US/Iran tensions. The US pulled “non-emergency” staff from Iraq in response to intelligence about Iran back threats. The question is “Are the Iran threats as credible as the threats from Iraq’s weapons of mass destruction? WTI recovered from the drop in prices after The EIA reported US inventories rose 5.4 million barrels.
USDCAD broke minor uptrend support at 1.3440 yesterday and dropped further overnight, supported by commodity price gains. Yesterday’s domestic inflation report was “as expected” and contributed to the USDCAD selling pressures.
Canada Manufacturing Shipments are expected to rise 1.1% compared to April’s decline of 0.2%. If so, the data should lead to USDCAD testing support in the 11.3370 area.
US economic reports include Initial Jobless Claims, Housing Starts, Building Permits and the Philadelphia Fed Manufacturing Survey.
USDCAD Technical Outlook
The intraday USDCAD technials are bearish while prices are below 1.3440, and looking for a test of support at 1.3370. If broken, prices could drop to 1.3290, the October uptrend line. For today, USDCAD support is at 1.3370 and 1.3340. Resistance is at 1.3440 and 1.3480. Today’s Range: 1.3370-1.3460
