The US dollar has pared back some of it’s overnight gains in a tentative, modestly risk adverse start to a nonfarm payrolls week. The monthly US employment report (released on Friday) may have diminished importance due to Fed Chair Yellen’s comments at the end of last week. Ms. Yellen appeared to endorse comments from other Fed officials suggesting that a rate increase in March was appropriate. Those comments and North Korea gave the greenback a modest bid when Asia opened.
North Korea’s launch of four ballistic missiles, (three of which landed in the Sea of Japan) sparked a minor bout of risk aversion trading and annoyed Japanese officials. Prime Minister Abe said “(The test-firing) clearly shows that North Korea is now a new level of threat.”
USDJPY gapped lower on the Asia open, falling from 114.12 to 113.73. The gap was quickly filled and then USDJPY spent the entire overnight session bouncing within a 114.12-113.55 range.
AUDUSD and NZDUSD traders were initially spooked by the North Korean actions but the moves were minor and unwound quickly. Traders there were more focused on Tuesday’s RBA interest rate announcement. Higher than expected Australia Retail Sales data helped take the sting out of the risk aversion sentiment.
China announced that it had lowered it’s 2017 growth forecast to 6.5%, down from 6.7% in 2016
EURUSD and GBPUSD were rather choppy but well within recent ranges. French election developments saw EURUSD rise and the fall. Sterling was soft on Brexit issues and ahead of Wednesday’s UK budget.
Oil traders were nervous due to the downgraded China growth forecast and concern about Russia’s compliance with Opec production cuts. WTI has chopped around within a $53.34 -$52.75 band and is currently at the top of that range.
USDCAD traded quietly within a narrow range but with a bullish bias due to divergent Canada/US interest rate policies.
There is a lot of Canadian data this week but none today. The impact of the data on USDCAD will be minimal due to the recent Bank of Canada statement. The statement discounted recent economic improvements as temporary
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish while prices are above 1.3370. USDCAD is consolidating last week’s post-BoC statement gains within a 1.3370-1.3440 range. A break either side will yield another 0.0050 points.
Today’s Range 1.3370-1.3440
Chart: USDCAD 30 minutes
The intraday USDMXN technicals are bearish and in a descending downtrend channel bound by 19.5900 on the top and 19.3870 on the bottom. A top-side break will extend gains to 19.7000 while a downside break will lead to 19.2000
Chart: USDMXN hourly