June 10, 2019

jUNE 10, 2019

USDCAD Open  (6:00 am) 1.3268-72    Overnight Range 1.3228-1.3279

The US dollar didn’t have a good day on Friday.  Nonfarm payrolls missed the mark with a mere 75,000 jobs added, and that fueled that the Fed would cut rates. The CME FedWatch tool suggests the probability of a cut July 31 at 65%.

Those fears were pushed to the back burner overnight after Mexico reached an accord on immigration and avoided the US imposing 5% tariffs on Mexico imports.  The issue is not resolved, and a deal with President Trump is written in sand. Trump already tweeted that “There is now going to be great cooperation between Mexico & the USA, something that didn’t exist for decades. However, if for some unknown reason… …..there is not, we can always go back to our previous, very profitable, position of Tariffs.”

AUDUSD and NZDUSD were under added pressure from weaker than expected China trade data  Both currency pairs gave back all of their Friday, post NFP gains.

USDJPY gapped higher at the Asia open and fully recouped Friday’s losses in the process. The rally was fueled by the improved risk tone and a rebound in 10-year US Treasury yields from 2.065% in Asia to 2.138% in early New York trading.

European markets were quieter than normal because of Whit Monday holidays.  The US dollar rally on the Mexico news and the weak China data pushed EURUSD down from 1.1330 to 1.1292.  The single currency is also weighed down by fresh talk of ECB rate cuts.  Reuters, quoting two sources reported, “policymakers are open to cutting the ECB’s policy rate again if economic growth weakens in the rest of the year and a strong euro hurts a bloc already bearing the brunt of a global trade war.”

GBPUSD has given back all of Friday’s gains and then some.  A slew of weaker economic reports and the US Conservative party leadership race undermined the currency.  April GDP fell 0.4% compared to -0.1% previously. Manufacturing and Industrial Production were sharply weaker than forecast.

Oil prices are consolidating Friday’s gains.  WTI rose from $52.65 on Friday to $54.25/b in New York trading today.  Traders are torn between hopes for price support from Opec and Russia production cut extensions to concerns about the US/China trade war on global demand.  Saudi Arabia Energy Minister Khalid al-Falih said Russia is the only producer still undecided about an extension.

USDCAD broke below key uptrend line support at 1.3270 on Friday, dropped to 1.3228 overnight but recouped all those losses.  Improved risk sentiment, the oil price rebound, and broad US selling undermined USDCAD.  However, losses were contained by increasing chatter that the Bank of Canada will cut interest rates.  JPMorgan economists are forecasting a cut in October while CIBC is predicting on in June 2020.  JPM suggests that trade tensions, soft oil prices and slowing US  and growth will necessitate the cut.

Canada housing starts rose 202,300 compared to the forecast for an increase of 196,400.  Building permits jumped to 14.7% from 2.8% in March.

USDCAD Technicals

The intraday and short term USDCAD technicals are bearish while prices are below 1.3340.  Friday’s break of 1.3270 opened the door to further losses to 1.3120 and then 1.2990.  A break above 1.3340 would negate the downside pressure and shift the focus to 1.3440.  For today, USDCAD support is at 1.3240 and 1.3220.  Resistance is at 1.3290 and 1.3320. Today’s Range 1.32400 1.3320

Chart: USDCAD 1 hour