A minor bout of risk aversion sentiment rippled across FX markets overnight. Weaker than expected China December Trade data (Exports -4.4%, Imports -7.6%), tomorrow’s UK Brexit vote, Trump’s threat to Turkey and the ongoing US government shutdown led to demand for the traditional “safe-haven” assets.
The Japanese yen and Swiss franc opened in New York with a small gain. The commodity currency bloc and Euro were lower, while Sterling was unchanged, compared to Friday’s New York close. Liquidity was less than stellar in Asia due to a holiday in Japan.
US equity futures point to a negative open for Wall Street, with traders a tad worried about US Bank earnings data which starts with Citigroup’s results today. US Treasury yields are also softer. The 10-year yield is down 1.66% to 2.662% while the 30-year yield slipped 0.84% to 3.011%.
FX markets and Turkey didn’t like President Trump’s tweet that said: Starting the long overdue pullout from Syria while hitting the little remaining ISIS territorial caliphate hard, and from many directions. Will attack again from existing nearby base if it reforms. Will devastate Turkey economically if they hit Kurds. Create 20-mile safe zone… …Likewise, do not want the Kurds to provoke Turkey. Russia, Iran and Syria have been the biggest beneficiaries of the long term U.S. policy of destroying ISIS in Syria – natural enemies. We also benefit but it is now time to bring our troops back home. Stop the ENDLESS WARS!”
Prime Minister Theresa May is expected to lose the parliament vote on her Brexit plan which occurs tomorrow. There is talk that if (when) the vote fails, the UK will seek an extension to the March 29 deadline.
WTI oil prices continued to slide from Friday’s $53.27 peak. Prices closed at $51.71 on Friday and opened at $50.77 today. Positive comments from Saudi Arabia Energy Minister Khalid al-Falih suggesting oil demand was strong could not counter selling pressure from the weak China trade data
FX markets will watch Wall Street’s reaction to the Citigroup earnings report today. There isn’t any US or Canadian economic data available today.U
USDCAD hovered around Friday’s closing rate overnight. Last week’s somewhat dovish Bank of Canada outlook and the end of week plunge in oil prices boosted USDCAD. The rally back above the 1.3240-60 area, suggests a short term bottom is in place at 1.3180, suggesting a retest of resistance in the 1.3420 area. Friday’s release of Canadian inflation data and tomorrow’s Home Sales data are the only significant economic reports on the agenda. Neither are expected to provide any support to the Canadian dollar.
The intraday USDCAD technicals turned bullish on Friday when with the break of the January downtrend line at 1.3210. Traders are looking for further gains through resistance at 1.3310 to lead to a test of 1.3420 which is the 50% retracement level of the January range. For today, USDCAD support is at 1.3240 and 1.3210. Resistance is at 1.3310 and 1.3340.
Today’s Range 1.3240-1.3310