August 14, 2019

USDCAD Open (6:00 am EDT) 1.3243-46   Overnight Range 1.3213-1.3246

President Trump toys with traders like a kitten with a plush mouse. Financial markets dance to his comments and tweets like a puppet on steroids as was readily apparent yesterday. The President announced that the US would delay the imposition of 10% tariffs on many of the Chinese goods scheduled for September 1, until December 15. The Office of the Trade Representative said, “Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”

Safe-haven currency trades were abandoned. USDJPY soared from 105.21 to 106.97, and USDCHF rallied from 0.9663 to 0.9765. Ten-year US Treasury yields jumped to 1.705% from 1.625%, and Wall Street recouped all of Monday’s losses. The US dollar closed the New York session on a mixed note.  EUR, JPY, GBP and CHF posted losses while the commodity bloc currencies gained.

Happy days are here again! Not quite. Asia traders were unimpressed with weaker than expected China Retail Sales and Industrial Production in July, and there is a slight odour of risk aversion in the air. AUDUSD was trading at 0.6805, supported by Consumer Confidence and Wage Price data when the Chinese data was released. Prices dropped steadily and are trading in New York at the 0.6755. NZDUSD followed AUDUSD lower.

USDJPY chopped about in a 106.14-64 range in overnight and in early New York trading.  Prices traded with a negative bias due to weak China data and a drop in 10-year Treasury yields down to yesterday’s 1.625% low.

EURUSD traded steadily in a tight range.  German Q2 GDP was -0.1% as expected and is flirting with recession territory. Eurozone Q2 GDP was as expected at 1.1% q/q, but Industrial Production was worse than expected. (Actual -1.6% m/m vs forecast -1.4%) However, prices have inched to the top of the overnight band as traders digest the implications of the Chinese data.

Sterling is trading in its own world. GBPUSD rallied from 1.2046 to 1.2092 in New York trading after a slew of stronger than forecast economic reports. UK CPI rose 2.1% y/y in July.  Producer Prices were also higher than expected. The data was strong enough to distract traders from Brexit concerns and is squeezing short GBPUSD positions.

Chinese trade negotiators and their American counterparts have been chatting by phone and plan to keep talking according to the South China Morning Post. China still intends to attend negotiations in September.

Oil prices shrugged off a 3.7 million barrel increase in weekly crude stocks as reported by API yesterday. WTI traded in a $56.26-$56.82 range.

USDCAD losses following Trump’s news of a tariff delay were short-lived. Prices dropped from 1.3290 to 1.3189 yesterday, consolidated in Asia and climbed steadily in Europe and are trading at 1.3285 in New York as of 7:25 am. The lack of Canadian economic data or Bank of Canada speakers means USDCAD price movement will track broad US dollar moves.

There isn’t any US data of note today.

USDCAD Technical Outlook

USDCAD is locked within a 1.3180-1.3340 range  Multi-bottom support, and uptrend line support reinforce the floor at 1.3180.   A minor downtrend line caps the the top at 1.3340. For today, USDCAD support is at 1.3240 and 1.3210.  Resistance is at 1.3290 and 1.3320.  Today’s Range 1.3240-1.3310.

Chart: USDCAD  4 hour