USDCAD open 1.2980-84 (6:00 am EST)          Overnight Range 1.2959-1.2982

Iran and US tensions continue to dominate the news cycle with plenty of speculation about how Iran will retaliate to the US drone strike that killed Iran General Qasem Soleimani.   Talking heads are concerned-FX and equity markets not so much. 

The Canadian Merchandise Trade deficit narrowed to just $1.09 billion, which was largely expected.  Exports declined 1.4% and imports were down 2.4%.  The Canadian dollar ignored the news.

The US dollar closed yesterday in New York with small gains and those gains were extended overnight led by a 0.88% rally against the Australian dollar. NS

FX Market Snapshot

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

Source:  Saxo Bank/IFXA

EURUSD was directionless in a 1.1166-96 trading range.  Eurozone November Retail Sales beat estimates, rising 2.2% y/y compared to the 1.3% forecast.  December preliminary inflation was as expected at 1.3% y/y, which was still better than November’s 1.0% result.  The intraday EURUSD technicals are bearish while prices are below 1.1200, looking for a test of the November uptrend line at 1.1105.

GBPUSD traded its entire 1.3143-1.3211 range in the first hour or so of the European open in part due to GBPCHF trades after Swiss CPI and FX reserves data was released.  UK politicians return to work today and will debate the January 31 Brexit deadline bill.  Prime Minister Boris Johnson’s majority government takes the uncertainty out of the equation.  The GBPUSD technicals are bullish above 1.3105 and looking for a retest of resistance at 1.3350.

USDJPY tested the bottom of its overnight range with sales of AUDJPY playing a role.  However, rising US Treasury yields and fading fears of a full-scale US Iran war drove prices to 108.49 by the US open.  The intraday technicals are bearish while prices are below 108.50.

AUDUSD dropped below support at 0.6930 and accelerated lower following weaker than expected Jobs advertisements data and concerns about the impact of the wildfires on the economy.  AUDUSD technicals are bearish below 0.6940, looking for additional losses to 0.6830.

WTI oil prices are well-below yesterday’s $64.60/barrel peak.  They dropped to $62.36 in Asia as a lack of follow-through on Irani threats to the US sparked a bout of profit-taking.  Prices ticked higher in Europe but slipped again in early New York trading.

Gold prices dipped and nearly filled the Friday close/Monday open gap.  The Iran/US dispute is still a war of words and the lack of escalation triggered some profit taking.  The intraday technicals are bullish above $1,538.60.

USDCAD could be undermined further if this mornings Ivey PMI data surprises to the upside, even though most economists ignore this report.   USDCAD continues to consolidate losses since breaking support at 1.3100 on Boxing day.  The currency pair is in a downtrend while prices are below 1.3000, looking for a break of the 1.2930-50 area to extend losses to 1.2850. Above 1.3000 targets 1.3050.

Chart: USDCAD hourly

Source:  Saxo Bank