November 27, 2019

USDCAD open 1.3264-68 (6:00 am EST)    Overnight range 1.3265-1.3280

October Durable Goods, Initial Jobless Claims, and Q3 GDP results were a tad better than expected but the news failed to inspire FX traders.  The US dollar was not inspired by the news, mainly because many traders were riding “Planes, Trains, and Automobiles as they headed “Home for the Holiday’s

Asia equity indices closed higher, European bourses are in the green, and US equity futures point to Wall Street adding to yesterday’s gains.  President Trump’s comments about being in the final throes of a trade deal and optimistic sound-bites from top trade negotiators, fueled the equity market rally.

FX traders appear to have turned a deaf-ear to the trade talk noise suggesting that prices already reflect a Phase 1 deal.  The US dollar opened close to unchanged against the G-10 majors today.

FX Market Snapshot

Change in currency value against the US dollar from NY close to NY  open

Source:  Saxo Bank/IFXA

Today is not an “official” holiday in the US, but those that can, will be heading home for the holidays rather than into the office. US markets are closed on Thursday and close early Friday.

EURUSD is probing support in the 1.1000 area where there are reportedly sizeable option strikes maturing today, which suggests trading some price volatility around 10: am. The intraday technicals are bearish below 1.1030, looking for a break below the 1.0990-1.1000 area to extend losses to 1.0950.

GBPUSD traded down to 1.2828 in Asia and then bounced to 1.2890 just as New York opened.  A break above 1.2890 opens the door to a test of 1.2970, but a failure would send prices down to 1.2800. Prices are tracking UK polling results, with GBPUSD mirroring Conservative party polling results.

The USDJPY hourly uptrend from the November 20, 108.20 low is intact while prices are above 108.90. However, a failure to extend gains above 109.20 suggests a drop to 108.50. Gains from improved risk sentiment are capped by expectations for lower US rates, for longer.

AUDUSD is suffering from renewed concerns about lower interest rates. Westpac Bank’s updated forecast calls for two rate cuts in 2020, which would take the OCR to 0.25% from its current level of 0.75%. New Zealand’s Financial Stability report and trade data did not impact NZDUSD.

West Texas Intermediate (WTI) oil prices popped above $58.10/barrel yesterday, a level which had capped gains since September 23.  Prices rallied to $58.65 in early New York trading. Prices are underpinned by expectations for a Phase 1 trade deal and by hopes Opec extends production cuts until March 2020. Yesterday’s rise in US crude inventories did not deter bulls.

USDCAD is under pressure due to the failure to break above 1.3330 and the subsequent drop below the 200-day moving average (1.3278) triggering stop-loss selling. USDCAD is further undermined by oil prices and hopes for a US/China trade. Bank of Canada Governor Poloz’s comments last week that suggested Canadian interest rates would remain unchanged for the foreseeable future, more than offset Deputy Governor Wilkin’s dovish speech, a couple of days earlier. USDCAD may also suffer due to month-end portfolio rebalancing selling pressures.

There is a mess of US data today, headlined by Durable Goods Orders for October. The economic reports shouldn’t do anything to dissuade the Fed from its steady rate policy.USDCAD Technical View

The intraday USDCAD technicals turned bearish with the failure to break above 1.3330 and the subsequent drop below the 200 day moving average at 1.3278 which sets the stage for a retest of the 100 day moving average at 1.3213.  For today, USDCAD support is at 1.3250and 1.3210.  Resistance is at 1.32900 and 1.3330.  Today’s Range 1.3210-1.3290

Chart:  USDCAD daily

Source: Saxo Bank