August 2, 2019

USDCAD open (6:00 am EDT) 1.3223-27          Overnight Range: 1.3212-1.3263

Forecasters nailed the US Non-farm payrolls report.  The consenus estimate was for a gain of 164,000 jobs was right on the money.  The US Bureau of Labor Statistics reported “Total nonfarm payroll employment rose by 164,000 in July, and the unemployment rate was unchanged at 3.7 percent.”  The US dollar dipsy-doodled on the news but quickly settled close to pre-data levels against most of the G-10 major currencies.

USDCAD was the exception. It jumped from 1.3233 to 1.3263 but that move was because of of the Canadian merchandise trade data.   The trade surplus narrowed, but the 5.1% drop in exports sparked the USDCAD rally.   

Yesterday, President Trump tweeted another China tariff announcement  and the impact reverberated across the globe. The President, perhaps bored with his feud with Baltimore politicians, gutted the moderately positive sentiment that percolated after the Beijing trade talks.  In a series of tweets, he admitted the talks were constructive, complained that China wasn’t buying American agricultural products as promised, and announced a 10% tariff “on all remaining 300 billion dollars of goods.”

Oil prices, Wall Street stocks, US Treasury yields, and USDJPY plunged.  The sell-off continued in Asia and Europe. The Nikkei 225 lost 2.11%, European bourses are deep in the red, and Wall Street futures point to a lower opening today.  The reaction to Trump may have been exacerbated by Fed Chair Powell’s muddled message on Wednesday.

AUDUSD closed at 0.6804 and inched higher during the Asia session, supported by better than expected July Retail Sales (Actual 0.4% vs forecast 0.3% m/m) and PPI data. The gains were not sustained, and prices retreated ahead of today’s US employment report, and on concerns the RBA will cut interest rates on Tuesday.

USDJPY is trading just above its  2019 low of 106.87.  The drop in US 10 year Treasury yields from yesterday’s 2.55% peak to 1.854% in early New York trading, and dovish BoJ minutes are weighing on the currency pair.

EURUSD caught a bit of a “safe-haven” bid following Trump’s trade tweet.  It got an added lift today, when Eurozone Retail Sales rose 2.6% y/y in June, well above the 1.3% forecast.

Sterling chopped around in its Brexit hell.  The move died out and prices are trading at 1.1082 in New York.

Bank of England Governor Mark Carney stated the obvious yesterday when he warned that a “no-deal” Brexit would be an instant shock to the UK economy. GBPUSD traded erratically in a 1.2092-1.2143 range.

Oil prices tracked broad US dollar moves after Trump’s tweet.  WTI fell from $56.91 to $53.70 before rebounding to $55.18 at today’s open.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while prices are above 1.3190, looking for a decisive break of resistance in the 1.3240 area, to spark a fresh rally through 1.3290 to 1.3390.   A break below 1.3190 would target  uptrend line support at 1.3110.  For today, USDCAD support is at 1.3190 and 1.3160.  Resistance is at 1.3240, 1.3290 and 1.3330.  Today’s Range 1.3120-1.3290

Chart: USDCAD daily

Source:  Saxo Bank