July 26, 2019

USDCAD open (6:00 am EDT) 1.3180-84           Overnight Range: 1.3159-1.3192

Preliminary Q2 GDP data was supposed to show that US economic growth slowed dramatically. It slowed, but not as dramatically as expected.   GDP rose 2.1% rather than the 1.8% forecast but the result was well below the 3.1% gain in Q1.  The Bureau of Economic analysis (BEA) attributed the increase to positive contributions from personal consumption expenditures, among others.

The US dollar extend gains seen overnight as everyone seems to want greenbacks and are shunning the other majors due to politics or central bank policies. 

EURUSD is under pressure following yesterday’s dovish ECB outlook.  They left rates unchanged and said they were waiting for new forecasts before adjusting policy.  That lit the fuse for an explosive September meeting which could mean rate cuts, tiered deposit rates and more quantitative easing.  EURUSD bounced in a 1.1103-1.1186 range yesterday and opened at the bottom of its overnight 1.1133-50 range.  The sentiment is bearish ahead of today’s US Q2 GDP data.

Sterling is cooking, in part due to extreme heat roasting the country.  Fresh “no-deal” Brexit concerns are driving GBPUSD lower. The European Union said they would stick with the Theresa May’s Brexit agreement.  Boris was not amused.  Neither were GBPUSD traders.  The sold the currency pair, driving it from 1.2458 to 1.2428 where it is sitting in early New York markets.

USDJPY traded sideways in a 111.57-111.73 range alongside 10-year US Treasury yields which were stagnant around 2.07%.  Traders ignored Tokyo inflation data while awaiting today’s US GDP data.

AUDUSD and NZDUSD traded lower due to ongoing concerns about upcoming rate cuts in both countries.

Oil prices are steady, and at $$56,43/barrel are just above the mid-point of this week’s range.  Middle East tensions in the Strait of Hormuz and Opec production cuts support prices while concerns of slowing global demand limit gains.

USDCAD broke above resistance in the 1.3160 area, which had capped gains since June 25, in a thin Asia session.  The subsequent move above 1.3180 opens the door to a test of resistance at 1.3230.  Prices are supported by broad US dollar weakness.  However,  the Bank of Canada has good reasons to stay on the sidelines, thanks to robust data and firm oil prices. USDCAD gains should be limited, at least in the short term

USDCAD Technical Outlook The intraday technicals are bullish while prices are above 1.3130, supported by the overnight break of 1.3180, which targets further gains to 1.3230 and then 1.3280.  A break below 1.3130 would suggest a retest of support in the 1.3060-90 area.  For today, USDCAD support is at 1.3150 and 1.3120.  Resistance is at 1.3210 and 1.3230.  Today’s range 1.3150-1.3230.

Chart USDCAD daily