May  13, 2019

USDCAD Open (6:00 am EDT) 1.3424-27   Overnight Range 1.3418-1.3443

President Trump is doing his best to inflame trade tensions.  Last night he tweeted “We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate. We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries… ….We will then spend (match or better) the money that China may no longer be spending with our Great Patriot Farmers (Agriculture), which is a small percentage of total Tariffs received, and distribute the food to starving people in nations around the world! GREAT!

As many have pointed out, China doesn’t pay US tariffs.  American’s do.

China has not retaliated yet.  Chinese traders were defensive with equity markets retreating and USDCNY rising.

FX markets opened in New York, little changed from Friday’s close. AUD, NZD, and Cad were a tad softer while GBP, CHF, and JPY were slightly higher.  EUR was unchanged, and European equity indices were in the red.  There wasn’t much in the way of economic reports to help with direction, either.

Oil prices soared.  WTI oil rose from $61.24/barrel to $62.59/b on reports that Saudi Oil tankers were attacked off the coast of the UAE and just outside the Strait of Hormoz.  Iran is suspected to be behind the attack.  The EIA estimates that 30% of crude and other oil liquids pass through this waterway.

The impact of Friday’s record-setting employment gains has already faded.  The Bank of Canada was concerned about low inflation, not employment.  Friday’s data supports the Bank of Canada view that the economy will rebound in the second half.

There aren’t any domestic or US economic reports available today leaving markets to fret about trade tensions.

USDCAD Technical Outlook

USDCAD is consolidating losses after touching 1.3502 on Thursday and then plunging to 1.3380 on Friday, after the Canadian employment report. The intraday technicals are mixed.  Prices are modestly bearish below 1.3450 and bullish above 1.3415.  A topside break will yield 1.3480 and then 1.3520.  A downside break will test 1.3370.  The 1.3370-1.3520 range has been intact since April 22.  The fact that it couldn’t break to the downside following record job gains and soaring oil prices overnight, suggests the range will remain intact for the rest of this week, at least.  Today’s Range: 1.3410-1.3480 Chart: USDCAD 4 hour