The US dollar rallied against all the G-10 major currencies. The New Zealand dollar edged out the British pound for the title of the worst performing currency pair since Friday’s New York close.
On-going US trade tensions against, China, Europe and Canada combined with emerging market concerns, particularly Turkey and Argentina and the outlook for higher US interest rates continues to underpin the greenback.
The Canadian dollar got trashed after the Friday Nafta deadline passed without a deal. Reportedly, the two main sticking points are the dispute resolution clause and dairy supply management. The Liberal friendly domestic media suggests that Canada has the American’s “right where they want them.” They quote various US union officials and politicians who support a deal with Canada for the optimism.
President Trump doesn’t see it that way. He tweeted on Saturday “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere with these negotiations, or I will simply terminate NAFTA entirely & we will be far better off…” and then added “….Remember, NAFTA was one of the WORST Trade Deals ever made. The U.S. lost thousands of businesses and millions of jobs. We were far better off before NAFTA – should never have been signed. Even the Vat Tax was not accounted for. We make new deal or go back to pre-NAFTA!”
FX traders appear to agree with Trump. USDCAD rallied from 1.2890 on Thursday, just before the Canada GDP data to 1.3152 just before New York opened this morning. Tomorrow’s Bank of Canada meeting is unlikely to provide any relief. The elevated risk of a Nafta collapse and the weaker than forecast GDP report dropped the odds of a rate hike to close to zero.
European traders sold EURUSD to start the session with prices dropping from 1.1610 to 1.1557 despite slightly better Eurozone PPI data. GBPUSD sank after PMI Construction missed forecasts (Actual 52.9 vs 55.0) and because of Brexit rhetoric warning of the rising risks of a “no deal” result.
In Asia, the RBA left the OCR rate unchanged as expected. The statement was tweaked slightly which some took to be a “hawkish” sign. AUDUSD rallied from 0.7185 to 0.7234. US/China trade tensions and expectation’s for higher US rates drove prices down to 0.7159 in Europe.
USDJPY traded quietly in Asia but climbed during the European session due to broad US dollar strength. However, the rally stalled at resistance in the 111.40-60 zone.
Oil prices soared due to Hurricane Gordon watch hitting the Northern Gulf Coast tonight in the Gulf of Mexico. Some rigs have been evacuated WTI climbed from $69.54/barrel on Friday to $71.19/b today.
The day ahead brings US ISM Manufacturing PMI for August (forecast 57.7 vs July 58.1) and Construction spending.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish above 1.3100 looking for a decisive break above resistance in the 1.3180-90 area to target a retest of 1.3385. A break below 1.3100 would lead to another test of 1.3040. The uptrend line from February is intact above 1.2950. For today, USDCAD support is at 1.3120 and 1.3070. Resistance is at 1.3190 and 1.3240
Today’s Range 1.3120-1.3220