September 18, 2019
USDCAD Open (6:00 am EDT) 1.3260-64 Overnight Range 1.3243-1.3269
It’s decision day for the Fed. The CME Fedwatch tool suggests a 54.2% probability for a 0.25% move lower and a 45.8% probability for unchanged. It also suggests a lot of folks will be disappointed. If so, the FX majors will see some wild swings.
The US dollar closed yesterday with small losses across the board and opened this morning with small gains.
FX Market Snapshot
Change in Currency value vs the US dollar- NY close to NY open
USDCAD continues to trade as an “afterthought” in global FX markets and even today’s modestly weaker than expected Canadian inflation data, barely caused a ripple. August CPI fell 0.1% m/m compared to July’s 0.5% m/m rise. The drop was as forecast but year over year CPI rose 1.9% compared to 2.0% y/y , as forecast. Today’s inflation numbers and yesterday’s weaker than expected manufacturing shipments data don’t bode well for those expecting Bank of Canada policy to remain steady.
GBPUSD gave back half of yesterday’s gains after running into resistance at 1.2525, yesterday. Profit-taking and a lack of actionable Brexit news put the currency pair on the defensive, and then a rash of UK economic reports exacerbated the selling. UK August CPI rose 1.7% y/y (forecast 1.9% y/y) and Core CPI rose 1.5% y/y. (forecast 1.8%) Housing prices rose0.7% compared to forecasts for a 1.2% y/y rise. GBPUSD dropped from 1.2505 to 1.2441 before bouncing to 1.2462 in early New York trading.
EURUSD suffered from weaker-than-expected August inflation, (CPI Actual 0.1% vs forecast 0.2%) and pre-FOMC meeting USD dollar strength. EURUSD traded sideways in Asia and then dropped from 1.1067 to 1.1039 as New York walked in.
USDJPY opened at the session low, climbing from 108.10 to 108.26. Traders ignored Japan trade data and maintained a bullish bias, in part because of lingering Fed rate cut expectations.
Weaker than expected data undermined AUDUSD. Westpac Leading Index was -28% compared to +0.20 in July, suggesting that the July increase was an anomaly. The index has been in negative territory for eight of the last nine months.
NZDUSD support from higher GlobalDairyTrade auction prices and a slight improvement in the Current Account deficit disappeared before Europe opened. Sellers emerged ahead of today’s FOMC decision.
West Texas Intermediate (WTI) oil prices consolidate yesterday’s losses in a $58.68/barrel-$59.40/b range. Saudi Arabia claims that about 50% of oil production is restored and that full production will resume shortly, undercut prices. However, the US and Saudis claim that Iran was responsible for the attack. Fears of reprisals should limit WTI downside.
FX markets should trade sideways until the FOMC decision, due at 11:00 am PDT.
USDCAD Technical View
The intraday USDCAD technicals are bullish above 1.3240, but need a sustained break above 1.3340 to target 1.3550 and higher. A break below 1.3240 keeps the 1.3130-1.3340 range intact. For today, USDCAD support is at 1.3240 and 1.3190. Resistance is at 1.3290 and 1.3340. Today’s range 1.3230-1.3340
Chart: USDCAD 4 hour
Source: Saxo Bank