The US dollar climbed yesterday and consolidated those gains in a dull overnight session. Traders are sitting on the sidelines waiting to find out if the FOMC sticks to their 3+ rate hike projections in 2019 or switches gears, and pares rate hike forecasts to just 2. They will know by 2:00 EST today.
WTI oil plunged 7% yesterday, falling from $49.30/b to $45.80/b, boosting USDCAD in the process. A combination of thin markets, positioning, and new fears of another supply imbalance fueled the selling. The American Petroleum Institute reported a 3.45 million barrel increase in crude inventories, which didn’t help. Prices were stable overnight, drifting in a $46.04-$46.67/b range and they opened in the middle of that band.
EURUSD is still rangebound, needing to break above resistance at 1.1440 to spark bullish sentiment and a 1.1850 target. Prices are supported by the improved tone to the EU/Italy budget discussions and better than expected German PPI data today.
GBPUSD ignored a slew of economic reports which included PPI, CPI, Retail Price Index and DCLG Housing Price Index. Inflation data was “as expected”, but traders are more concerned with the risk of a “no-deal” Brexit. Despite that, GBPUSD drifted in a 1.2639-1.2675 range.
USDJPY traded heavily on the back of risk aversion concerns and falling US Treasury yields, The 10 year US Treasury yield is 2.819%. Asia equity indices were mostly lower despite Wall Street closing on a flat note.
USDCAD soared with the drop in oil prices, smashing through resistance at 1.3385 and 1.3440, which hung a target on the 1.3750 area. Prices are supported by expectations of slower Canadian growth exacerbated by low oil prices and the latest dovish Bank of Canada outlook. Canada CPI is due today and expected to drop from 2.4% in October to 1.8%, y/y. The weakness is being blamed on low oil prices.
The intraday and short term USDCAD technicals are bullish. The decisive break above 1.3385 on the daily chart represents the break of the 76.4% Fibonacci retracement level of the 1.3790-1.2065 range in 2017, implying a 100% retracement is likely. If so, that level is 1.3792. It won’t be a straight shot, there is resistance at 1.3530 and 1.3670. The intraday technicals are bullish above 1.3390. For today, USDCAD support is at 1.3440 and 1.3390. Resistance is at 1.3505 and 1.3530. Today’s Range 1.3390-1.3490