FX markets backed away from the volatility seen during Wednesday’s New York session. The US dollar extended losses against the majors but the moves were gentle, and the ranges were narrow.
Yesterday, US CPI was a tad higher than expected while Retail Sales were worse than forecast. That sent the US dollar on a wild ride. The initial reaction was to buy dollars, and the greenback soared against the majors. Suddenly, traders had second thoughts. The US dollar tanked. The move occurred despite a rally in Treasury yields and the inflation data suggesting the Fed could hike at a faster pace than originally thought. The rationale is a tad sketchy. It suggests that prospects of increasing global growth occurring while the US economy is a late-stages its recovery argues that better opportunities for investment are elsewhere.
USDJPY extended losses in Asia dropping from 106.93 to 106.15 even as US treasury yields climbed The Nikkei ended its string of losses and posted a 1.47% gain.
AUDUSD, buoyed by the broad US dollar weakness, got an added lift from a mildly better than expected employment report (Actual 16,000 vs forecast 15,000) The unemployment rate was 5.5% as forecast. NZDUSD followed AUDUSD higher, but both currency pairs gave back most of the gains by the time New York opened.
EURUSD inched higher in Asia and popped in Europe after news that the Eurozone Trade surplus widened to ¢23.8 billion from ¢22.4 billion.
GBPUSD added to yesterday’s gains rising from 1.3995 to 1.4075 before inching lower into the New York open. Traders have dismissed downside Brexit risks and glommed on to Bank of England rate hike hopes.
Oil prices climbed from $60.68 to $61.52, supported by the US dollar weakness but those gains were erased by the New York open. Topside moves continue to be limited by rising US production fears.
USDCAD spiked to 1.2642 from 1.2575 after yesterday US data and then plunged in an even nastier move, finishing the day at 1.2504. Additional selling occurred overnight until USDCAD found a floor at 1.2468. USDCAD moves are driven by general US dollar direction with domestic data have little or limited influence.
The recent USDCAD volatility may give added weight to remarks by Bank of Canada Deputy Governor Lawrence Schembri. He is speaking in Manitoba at 1:45 pm ET on “Canada’s approach to price stability.”
There is a bit of US data today, including Jobless claims and Philadelphia Fed Manufacturing Index which will be eyed to see if it agrees with the revised “faster pace of rate hikes” outlook. Traders will also be watching Wall Street and at the moment it looks like it will open in positive territory.
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish below 1.2505, looking for a break of support in the 1.2440-60 area to extend losses to 1.2250, where the uptrend line from September comes into play. USDCAD is sitting just above the mid-point between the Downtrend line from May 2017 and the uptrend line from September.. If 1.244090 area holds, a retest of the top is likely. A break below 1.2440 shifts the focus to the bottom. For today, USDCAD support is at 1.2440 and 1.2410. Resistance is at 1.2510 and 1.2550.
Today’s Range 1.2450-1.2530
