Range: Dec 30 (Noon) to NY Open Jan. 3- 1.3386-1.3458
The Canadian dollar has started off the New Year on a modestly upbeat note. A bump in oil prices and a positive outlook for commodities, in general, will do that. Nevertheless, the move is rather shallow.
Asia markets had a sleepy start to the new year. New Zealand was still closed and the rest of Asia wasn’t all that eager to get involved.
The Caixin China Manufacturing PMI (Actual 51.9 vs. forecast 50.7) gave Aussie and Kiwi a bit of a jump but that move didn’t last. The prospect of higher US rates trumped China commodity demand expectations, for now.
USDJPY traded sideways until the European session got going. After that, it was a straight-shot higher. Divergent US/Japan interest rate policies propelled USDJPY to 118.31 from 117.20
EURUSD retraced all of the gains achieved at month-end and dropped from a Dec.30 peak of 1.0592 to 1.0385 at this morning’s New York open. All-aboard the bullish dollar train.
Sterling mirrored EURUSD moves. GBPUSD peaked at 1.2386 on Dec. 30 and bottomed out at 1.2246 this morning. A better than expected Markit PMI report (Actual; 56.1 vs. forecast 53.0) didn’t have a lasting impact.
Oil prices snapped out of their 5 day $53.00-$54.35 range and spiked to $55.20. The Opec and non-Opec production cut that began January 1st is behind the move.
For the most part, equity traders liked the China data. Global equity indices are modestly higher, except for the Nikkei.
The Canadian dollar may benefit from remnants of the month-end portfolio rebalancing demand seen on December 30, in and support from rising oil prices. However, two weak domestic data points (CPI and GDP) have opened the door (slightly) to an interest rate cut which will limit USDCAD losses. A better than expected US ISM Manufacturing report this morning (Forecast 53.5) will underpin the US dollar ahead of Fridays nonfarm payrolls report.
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish. The end of December downtrend from the 1.3597 peak remains intact while prices are below 1.3470 and are looking for a break of support at 1.3350 to extend losses to 1.3310. However, the long-term uptrend is firmly entrenched while prices are above 1.3160. For today, USDCAD support is at 1.3410 and 1.3380. Resistance is at 1.3470 and 1.3510.
Today’s Range 1.3410-1.3480