US Q4 GDP( premiliminary) was widely expected to to beat the 3.0% forecast. It didn’t . Instead it posted a disappointing 2.6% gain and undermined the US dollar. Durable Goods orders beat the estimates but the data was ignored.
USDCAD did not get any benefit from the sinking US dollar after the GDP report. Canada Core CPI dropped to 1.2%, y/y in December. USDCAD popped to 1.2336 from 1.2304 on the news.
Presdient Trump, speaking in Davos, championed US investment and did not speak about the currency. Earlier, he told CNBC “ NAFTA’s a horrible deal, we’re renegotiating it. I may terminate NAFTA, I may not. We’ll see what happens.”
In Asia, US bears got back in the driver’s seat. Yesterday afternoon President Trump chirped his support for a stronger dollar, contradicting Treasury Secretary Mnuchin’s “weak US dollar benefits the US” statement. Trump also said that Mnuchin’s comments were misinterpreted, although, to anyone with Grade 1 English comprehension, Mnuchin’s statements were very clear.
Nevertheless, the US dollar soared. Trump’s defence allowed it to recoup all of the losses incurred after Mnuchin spoke.
Australia was closed for a national holiday, but that didn’t stop the dollar from adding to its gains. The rally quickly faded, led by a drop in USDJPY from 109.75 to 108.92 by mid-morning in Europe. That move gave AUDUSD and NZDUSD a lift, with both currency pairs recovering all of the losses that followed the Trump comments.
EURUSD and GBPUSD rallied. Traders seemed to have discounted Trump’s rebuttal and focused on ECB Council member Benoit Coeure’s comments about upside risks to Eurozone growth. EURUSD rallied to 1.2492 from 1.2371 while GBPUSD climbed to 1.4285 from 1.4113. The US dollar opened in New York with losses across the board compared to yesterday’s close.
Oil and gold prices are off their best levels but are still benefitting from the US dollar weakness. WTI oil is trading at ^5.63/b after touching $66.63 yesterday. Gold peaked at $1,365.98 and is currently sitting at $1,350.38.
USDCAD Technical Outlook
The USDCAD technicals are bearish and yesterday’s price action reinforced the downside bias. The bounce from the 1.2282 low hit a wall at 1.2400, which was a solid support level, previously. The failure to extend gains above that level shifted the focus to support in the 1.2250-1.2280 area. Below 1.2250 opens the door to 1.2000 while above 1.2400 suggests a period of 1.2280-1.2600 consolidation., for today, USDCAD support is at 1.2280 and 1.2250. Resistance is at 1.2350 and 1.2405.
Today’s range 1.2250-1.2350