Overnight Range 1.3028-1.3076
US National Security Adviser Michael Flynn resigned Monday night and that spooked Japanese yen traders into buying yen. That wasn’t the only reason. It seems that traders who bought USDJPY expecting a hawkish testiomony from Fed Chair Yellen today, may have changed their minds and unwound some of those positions.
The drop in USDJPY added to the Nikkei’s woes. The index was being battered by news that Toshiba delayed its earnings release. They later announced a $6.3 billion write down on their nuclear business.
AUDUSD rose from 0.7635 to 0.7684 in Asia and managed to hang on to the gains as New York opened. Better than expected Business Confidence and Conditions data combined with strong China data fueled the gains. NZDUSD went along for the ride.
Sterling got walloped when headline and core CPI for January missed expectations. (Actual t 1.8%, y/y vs forecast of 1.9%) The numbers were still higher than the month before. The data may have been just an excuse for Sterling traders to trim positions ahead of Yellen’s speech. Nevertheless, GBPUSD dropped from 1.2546 to 1.2444.
EURUSD ignored a miss in the ZEW Economic Sentiment and current Situation survey and managed to hang-on to most of its overnight gains. EURUSD rose from 1.0592 to 1.0632 before pulling back to 1.0620 when New York opened.
Oil prices moved higher on news that Opec production dropped by 1.2 million barrels per day since January. However, the move is just noise inside the 50.30-54.30 range that has contained prices since the beginning of January.
The general US dollar weakness has pushed USDCAD lower and the break of support at 1.3040 points to a test of 1.2990. Trump and Trudeau exchanged valentines yesterday in a meeting in Washington. Afterwards, President Trump said that he will tweak NAFTA but he is less worried about Canada-US trade than he is with Mexico. What he didn’t say was his definition of “tweak.”
Fed Chair Janet Yellen’s remarks to the Senate Committee on Banking should put a damper on FX trading today. Will she play Cupid for hawks or doves? Will she echo Philadelphia Fed President Harker’s hawkish remarks two weeks ago, or will she lean toward the more doveish view espoused by Minneapolis Fed President Kashkari? The CME FEDWatch tool suggests a mere 13.3% probability of a March rate hike, leaving plenty of room for a US dollar rally if Ms. Yellen’s comments contradict that view
|Close 4:00 pm EDT-Open 6:00 am EDT|
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish while prices are below 1.3080 with the overnight break of support at 1.3040 targeting a test of 1.2990. If broken, it would open the door to additional losses to 1.2727 (76.4% Fibonacci retracement of May-December range) For today, USDCAD support is at 1.3010, 1.2990 and 1.2960. Resistance is at 1.3040, 1.3060 and 1.3090
Today’s Range 1.2960-1.3060
Chart: USDCAD daily
USDMXN remains in the downtrend from the January 20 peak with the break of 20.5555, the 38.2% Fibonacci retracement level of the November-January range, which opens the door to a drop to the 61.8% level, 19.6406. The 50% level at 20.0980 may prove sticky. The intraday downtrend remains intact while prices are below 20.2740 looking for a move below 20.2008 to target 20.1710
Chart: USDMXN daily
Source: Saxo Bank