Range Dec. 23 (Noon)to Dec. 28, 6:00 am PST-1.3534-1.359
The US dollar squeezed out small gains against EUR, GBP, CHF and CAD but retreated against the antipodeans in extremely thin FX markets. Monday, G10 FX was shuttered except for USDJPY. Tuesday, US markets were open but lightly staffed
USDCAD rallied following the December 23 release of weaker than expected Canadian GDP data for October. The 0.3% decline starts the Q4 data on the back foot and jeopardizes the Bank of Canada forecast for 2016 growth of 1.5%. The previous day’s inflation data also missed the mark.
Weak economic growth and soft inflation data raise the risk that the Bank of Canada could cut rates on January 18.
However, a sharp rise in oil prices has helped take some of the sting out of the news. WTI has risen from $52.23 on Dec. 23 to $54.25 in Europe today. It has since drifted down. WTI is currently sitting at $53.83
On Tuesday, December 27, the US released strong Consumer Confidence report and a better than expected Case-Shiller Home Price Index. That data reinforced the Fed decision to raise rates and provided a bit of support to the US dollar.
EURUSD is under pressure. EURUSD has declined from an overnight peak of 1.0480 to 1.0386 in early New York trading. Weaker than expected Japanese economic reports including CPI undermined the yen. USDJPY climbed from a December 26 low of 117.00 to 117.80 overnight.
FX markets are extremely thin. Movements today and over the balance of the week will be more a product of intraday demand than macroeconomic positioning.
USDCAD technical outlook
The intraday USDCAD technicals are bullish above 1.3540. Resistance at 1.3590 is being tested as this report is being written. A decisive break will extend gains to 1.3660 and then 1.3740 with the 61.8% Fibonacci retracement level of 1.3838 lurking just above. A move below 1.3540 would risk a retest of the mid-December uptrend line at 1.3440. Longer term, only a break below 1.3070 would negate the uptrend.
Today’s Range 1.3540-1.3610
Chart: 1 hour