USDCAD Overnight Range 1.2852-1.2919  

USDCAD was flirting with major support in early New York trading but caution ahead of tomorrow’s Bank of Canada meeting appears to have won the morning and USDCAD drifted back towards 1.2900. The shift to risk-seeking sentiment sparked by the rally in oil prices and a very doveish Federal Reserve will continue to limit USDCAD gains.

The risk-on tone was evident in Asia.  AUDUSD powered higher, supported by better-than-expected NAB Consumer Confidence (+6 vs. forecast +3) and rising commodity prices. In Japan, a rising Nikkei lifted USDJPY off the lows, abetted by a bit of verbal intervention from the Ministry of Finance.

Europe saw very choppy trading in EURUSD as the single currency consolidated gains above 1.1400. Sterling had a good day, rising from 1.4226 to 1.4347.  Higher than expected inflation data didn’t really impact trading.  Thursday’s Bank of England meeting may be a non-event for FX markets due to the Brexit referendum in June.

Oil traders are anticipating a bullish outcome from the weekend’s Opec meeting in Doha.  Goldman Sachs analysts think that they will be disappointed because of increased supply from Iran and Libya, two nations that won’t be a party to any deal.

The Canadian dollar is in demand, in part because traders are anticipating a fairly upbeat Bank of Canada interest rate statement and monetary policy report. Just as governor Stephen Poloz was unimpressed with USDCAD at 1.4688, he is not likely to be too thrilled with USDCAD at 1.2850, either. Such being the case, it is not unreasonable to expect Mr. Poloz to copy Janet Yellen and focus on the risks to the economy in his press conference.  If so, USDCAD buyers would re-emerge.  We will know tomorrow.

USDCAD technical outlook

The intraday USDCAD technicals are bearish below 1.2920 looking to extend losses through major support at 1.2830-50 to 1.2580 which represents the 76.4% Fibonacci retracement level of the May 2015-January 2016 range.  A move above 1.2920 would target 1.2980. For today, USDCAD support is at 1.2850, 1.2830 and 1.2770.  Resistance is at 1.2890, 1.2920 and 1.2980

Today’s Range 1.2850-1.2920

Chart: USDCAD daily