The US dollar opened with small losses against the G-10 major currencies, except against the Japanese yen. It is a different story when compared to Monday’s start. GBPUSD is up 1.7%, and NZDUSD gained 0.67%. The Australian dollar is the biggest loser, followed by the euro and then the Loonie. The issues at the beginning of the week; Davos, Brexit, and US government shutdown are the same at the end of the week.
US equity futures suggest Wall Street will open in positive territory. There isn’t any US or Canadian data on tap, leaving FX traders to look elsewhere for direction
A GBPUSD rally kicked off in Asia after the UK Sun reported Irelands DUP party would support Prime Minister Theresa May’s Brexit plan if she could get changes to the ”backstop.” Prices climbed from 1.3066 to 1.3177 in Asia, but European sellers drove prices down to 1.3075 by the New York open. That’s because there is no evidence that the EU will agree to amendments or that the plan will survive the January 29 vote.
EURUSD closed on a negative note yesterday. European Central Bank President Mario Draghi warned eurozone risks are to the downside which pressured the single currency. However, he said that all of the downside risk factors were being addressed and expected the concerns to fade over time. Prices drifted higher overnight, rising from 1.1301 to 1.1345 in New York trading, despite a disappointing German IFO report. The Business Climate survey fell to 99.1 from 101.0 in December.
USDJPY traded in a narrow 109.52-109.89 range, torn between improved risk sentiment and softer US Treasury yields. AUDUSD and NZDUSD took advantage of the better risk tone and squeezed out minor gains, but the Australian dollar is still down for the week.
WTI oil prices continue to bounce inside a $52.00-54.00/barrel range. Yesterday’s EIA report that US crude inventories rose 7.9 million barrels failed to offset demand because the US threatened sanctions against Venezuela.
USDCAD support was derived from weak economic data including Manufacturing shipments, wholesale trade and Retail sales combined with softer oil prices and broad US dollar strength against the majors. That will continue to be the case next week, at least until Thursday’s November GDP report.
USDCAD tested and failed to break 1.3380, the top of the two week uptrend channel. The overnight break below 1.3340 suggests prices will dip to 1.3290, the bottom of the channel. If broken, prices sahould drop to 1.3220 and then 1.3170. A break above 1.3380 would target 1.3460. Today’s Range 1.3270-1.3360