January 16, 2020

USDCAD open 1.3033-1.3037 (6:00 am EST)  Overnight Range 1.3034-1.3046

American’s are still shopping and that is good for the US economy. December Retail Sales 0.3% m/m, as expected while the ex-autos component surpassed the forecasts, rising 0.7% m/m.  The Philadelphia Fed Manufacturing Index soared to 17 from a downwardly revised 2.4% in December.  The survey said “the survey’s indicators for current activity, new orders, shipments, and employment were all positive and increased from their readings in December.”

The US dollar inched higher on the news but remains well-below yesterday’s opening levels.

FX Market Snapshot

Change in currency value against the US dollar NY close to NY open (6:00 am EST)

Source: Saxo Bank/IFXA Ltd

EURUSD is trading at the top of its two-day 1.1120-60 range. Steady German inflation data provided a bit of support for the single currency. CPI rose 1.5% y/y in December, as expected.  A mild bout of positive risk sentiment stemming from the Phase 1 trade deal fueled broad US dollar selling which also lifted EURUSD. The intraday technicals are bullish while prices are above 1.1130 but need a decisive break above 1.1170 to suggest further gains.

  GBPUSD rallied alongside the rest of the G-10 majors and is now testing resistance in the 1.3060-70 area. A topside break would extend gains to 1.3130.

USDJPY is bid. Prices are supported by the improved to risk sentiment sparked by the completion of the Phase 1 trade deal negotiations and hope that the deal will spur global growth. However, the retreat in US 10 year Treasury yields from last week’s peak of 1.90% to 1.788% today, is slowing gains. The intraday technicals are bullish above 109.65, looking for a break of 110.20 to target 110.60.

NZDUSD outperformed AUDUSD overnight. Kiwi climbed to 0.6646 from 0.6618 while AUDUSD rose from 0.6904 to 0.6918. The US/China trade deal underpinned both currency pairs. However, some analysts are suggesting that because China must increase imports from the US, those gains may be at the expense of the Antipodean countries. The AUDUSD break of resistance at 0.6920 puts the spotlight on 0.6960 resistance.

Oil prices continued to slide. Yesterdays, Energy Information Administration (EIA) report of a 2.5 million barrel drop in US crude inventories for the week ending January 10, drove WTI oil down to $57.47/barrel. Prices recovered after the trade deal was inked, but gains were capped overnight when the International Energy Agency (IEA) warned oil supply would outstrip demand in 2020.

USDCAD dropped alongside the rest of the commodity currency bloc and for all the same reasons.  Fears of a dovish bias at next week’s Bank of Canada monetary policy meeting, limited losses. Prices are locked in a tight range as selling pressure from positive risk sentiment is offset by weak oil prices.

EURUSD traders will be looking ahead to ECB President Christine Lagarde’s speech around 1:00 pm, EST.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish, looking for a break of support at 1.3030 to extend lower to 1.2950. That sentiment is supported by the December 20 downtrend line which comes into play at 1.3070. A topside break would target 1.3150. For today, USDCAD support is at 1.3030 and 1.2990. Resistance is at 1.3070 and 1.3110. Today’s Range 1.3010-1.3110.

Chart; USDCAD 30 minute

Source:  Saxo Bank