USDCAD is in demand. It has soared since April 13, supported by a small decline in oil prices and bullish sentiment from M&A news. Three major foreign energy companies have recently announced plans to divest themselves of Canadian oilsands assets and the potential USDCAD buying arising from those transactions appears to be underpinning demand.
Furthermore, USDCAD has been trading like a sizeable order is being executed. When the US dollar was declining against the majors, it rallied against the Canadian dollar. The benefits from the Bank of Canada policy shift from dovish to neutral have vanished.
USDCAD bulls got additional support from President Donald Trump, yesterday. He told Wisconsin dairy farmers: “We are also going to stand up for our dairy farmers in Wisconsin. And I’ve been reading about it, I’ve been talking about it for a long time, and that demands, really, immediately, fair trade, with all of our trading partners. And that includes Canada,” he said Tuesday, raising his voice to emphasize the country.
“Because in Canada, some very unfair things have happened to our dairy farmers and others.”
Canadian dairy farmers had a cow.
Overnight, the US dollar put the brakes on this week’s decline and opened in New York with gains across the G10 spectrum. Most of those gains were at the expense of the commodity currency bloc and the Japanese yen.
NZDUSD moved higher in Asia, supported by the earlier report of a better than expected GlobalDairyTrade auction. That move didn’t last in Europe. NZDUSD dropped from 0.7050 to 0.7011.
The Australian dollar suffered the same fate. AUDUSD gains were erased in Europe on lingering disappointment from the RBA minutes and soft iron-ore prices.
USDJPY was bid from the Asia open and traded higher until New York started the day. USDJPY climbed from 108.39 to 108.95 on profit-taking and improved risk sentiment.
EURUSD held on to yesterday’s gains supported by better than expected Eurozone trade and inflation data that was as expected.
In Asia, Sterling failed to extend gains made after the British Prime Minister called a “snap” election. Instead GBPUSD traded sideways inside a 1.2809-1.2859 band.
Sterling’s rally following the election announcement was a classic “short squeeze.” Traders believe that the improved UK economy and the likelihood that the Conservative Party wins a large majority, will strengthen the UK’s Brexit negotiation.
Oil prices inched higher in Europe after Opec Secretary General Mohammad Barkindo reaffirmed the cartels commitment to stabilizing the oil market and reducing global inventories. WTI crawled up from $52.25/b to $52.60. Oil traders are looking for this morning’s IEA Crude Stocks change report to show another decline in inventories.
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish and targeting a break above resistance in the 1.3440-60 zone to extend gains to 1.3550. However, the pace and magnitude of the rally warns of near term consolidation which will be triggered by price action below 1.3410 and confirmed by a move below 1.3370. A break above 1.3460 will lead to a test of 1.3535. For today, USDCAD support is at 1.3410, and 1.3380 Resistance is at 1.3440, and 1.3480.
Today’s Range 1.3410-80
Chart: USDCAD 4 hour