June 4, 2019
USDCAD Open (6:00 am EDT) 1.3433-36 Overnight Range 1.3422-1.3447
Weaker than expected ISM Manufacturing PMI data, possible regulatory woes for major Tech companies, falling Treasury yields and St Louis Fed President James Bullard talking about Fed rate cuts led to US dollar weakness across the board, yesterday. That theme continued overnight. FX markets were choppy but opened this morning, close to yesterday’s New York closing levels.
The Reserve Bank of Australia surprised no one when it cut interest rates 25% to 1.25%. The statement said it was to support employment growth and provide confidence that inflations will be consistent with the medium-term target. AUDUSD bounced between 0.6964 and 0.6992 on the news, and it opened in New York at 0.6977. NZDUSD mirrored AUDUSD moves.
Falling Treasury yields and Bullard’s comments knocked USDJPY down from 108.06 to 107.85 in Asia. The 10-year US Treasury yield fell to 2.081% before climbing to 2.102% in early New York trading.
EURUSD inched higher until weaker than expected Eurozone May CPI (Actual 1.2% y/y vs forecast 1.3%y/y) knocked it off its 1.1276 peak down to 1.1255 in New York trading.
GBPUSD drifted higher in Asia and then sank in Europe after Markit Construction PMI for May was a disappointing 48.6 rather than the 50.5 expected. Topside gains are limited until the Leadership race is over.
China and the US continue to blame each other over the failed trade talks. The US Trade Representative and the Department of Treasury issued a joint statement on June 3 saying that China has chosen to “pursue a blame game misrepresenting the nature and history of trade negotiations between the two countries. To understand where the parties are and where they can go, it is necessary to understand the history that has led to the current impasse.”
Oil prices dropped from $54.54/barrel yesterday morning to $52.45/barrel today. The ongoing China/US trade war and Russia’s reported opposition to extending production cuts beyond the end of June are weighing on prices.
USDCAD traders ignored the drop in crude, and the currency pair slid on the back of broad US dollar weakness. Yesterday’s break below 1.3470 triggered stop-loss selling.
Traders will be looking ahead to a speech from Fed Chair Jerome Powell today. His speech is titled Monetary Policy Strategy, Tools and Communication Practices. Traders will be watching to see if he rebuts Bullard’s dovish comments. The US and Canadian economic calendars are light.Traders will be looking ahead to a speech from Fed Chair Jerome Powell today. His speech is titled Monetary Policy Strategy, Tools and Communication Practices. Traders will be watching to see if he rebuts Bullard’s dovish comments. The US and Canadian economic calendars are light.
The intraday USDCAD technicals are bearish following the break of 1.3470, representing the May uptrend line. The move below 1.3458 snapped the 50% Fibonacci retracement level of the May 22/May31 range and it targets the 76.4% level of 1.3404. Major uptrend support resides at 1.3350, which is the uptrend line from January 2018. For today, USDCAD support is at 1.3405 and 1.3370. Resistance is at 1.3450 and 1.3480. Today’s Range 1.3405-1.3480
Chart: USDCAD 4 hour