December 11, 2019

USDCAD open 1.3235-39 (6:00 am EST)              Overnight range 1.3229-1.3238

US inflation rose higher than expected in November. CPI rose 2.1% y/y compared to 1.8% in October which validates the Fed’s “wait and see” monetary policy stance.

The US dollar opened close to unchanged against everything but AUD but drifted lower following the inflation data.

FX Market Snapshot

Change in currency value against the US dollar from NY close to NY  open

Source:  Saxo Bank/IFXA

Today’s FOMC meeting should be rather tame. The US economy was recently described by Fed Chair Jerome Powell as “being in a good place”, and if anything, last Friday’s nonfarm payrolls reports, and today’s inflation news, bolstered that outlook. The Fed is on hold, and the statement and press conference will likely to reinforce that view.

The planned US tariff increase on December 15 is still a toss-up. Officials have said that they are close to a deal while simultaneously saying both sides are far apart on key issues. The decision to implement or delay tariffs rests with Trump, and he keeping his cards close to his vest.

GBPUSD dropped from 1.3210 yesterday afternoon to 1.3109 at the Asia open after a YouGov poll predicted a smaller Conservative majority; 28 seats vs 68 seats last week. The risk of a “hung parliament” (minority government) have risen. The GBPUSD uptrend is intact while prices are above 1.2640, a level being guarded by additional support at 1.2800.

EURUSD inched lower overnight, albeit in a tight, 1.1080-95 range, ahead of the FOMC meeting and this morning’s US inflation report. Prices rallied back to the top of the range after the US CPI report.

USDJPY is content to drift inside a 108.40-109.00 range. Demand due to the prospect of higher US Treasury yields is offset by concerns ahead of the weekends tariff deadline. The failure to secure a Phase 1 deal and rising tariffs could lead to safe-haven USDJPY selling.

AUDUSD outperformed NZDUSD in Asia, and then both currencies rallied into the New York open. New Zealand, Electronic Card Retail Sales data, was sharply higher, rising 5.1% y/y in November, compared to October’s 1.6% increase. Both currency pairs are awaiting the tariff decision. 

Oil prices are flirting around $59.00/barrel, supported by the latest round of production cuts and the API report that US crude inventories increased 1.41 million barrels last week.

USDCAD is steady, locked in a 1.3140-1.3330 range since November 5. The Bank of Canada’s optimistic outlook for the Canadian economy, combined with a few other major central bank officials suggesting the global economy is showing signs of “picking up,” have limited USDCAD gains. In addition, the steep jump in WTI oil prices is also weighing on the currency pair. The intraday technicals are warning of a 0.100 move on a break of either 1.3260 or 1.3220 (30-minute chart) 

USDCAD Technical View

The intraday USDCAD technicals are undecided.  A series of lower highs and high lows is coming to a head, which will lead to either 1.3350 or 1.3120, as shown by the 30 minute chart below. For today, support is at 1.3230  (100 day moving average and 1.3180. Resistance is at 1.3280 and 1.3310.  Today’s Range 1.3190-1.3290

Chart:  USDCAD 30 minute

Source: Saxo Bank