It was a plodding start to the FX trading week, in most G10 currency pairs, except for the Japanese yen.
USDJPY rallied from the Asia open in a move fueled by domestic data and geopolitics. North Korea and the United States appeared to have dialed back on the hostile rhetoric that dominated markets last week. Perhaps, it was because of China warning North Korea that they were on their own if they fired first. Or maybe because China told the US, that would defend North Korea if the American’s launched a pre-emptive strike. Or maybe it was because the battery died in President Trump’s cell-phone, preventing him from tweeting.
Japan Q2 GDP data surpassed expectations, rising 1.0%, q/q vs. forecast for a 0.6% gain helping to take USDJPY from 108.95 to 109.79,
Weaker than expected China Urban Investment (Actual 8.3% vs. forecast 8.6%) Industrial Production (Actual 6.4% vs. forecast 7.2% and Retail Sales (Actual 10.4% vs. forecast 10.8%) weighted on the antipodean currencies. AUDUSD dropped from 0.7917 to 0.7870 while NZDUSD fell to 0.7292 from 0.7329.
European and UK equities recouped some of Friday’s losses but EURUSD trading was uneventful. EURUSD popped to 1.1837 mid-morning when June Industrial Production data declined 0.6%. The forecast was for a drop of 0.5%, and the rally was reversed. EURUSD retreated to 1.1793 by the New York open.
Sterling traded sideways in Asia and then edged down from 1.3020 to 1.2964 in New York trading. Traders have downgraded Bank of England rate hike expectations. Brexit issues continue to cap gains.
USDCAD traded in a 1.2672-1.2714 range overnight. Stretched long CAD/Short US dollar speculative position and bullish technicals are providing support while the prospect of additional Bank of Canada rate hikes caps rallies.
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish while prices are trading above the 1.2650-70 zone and looking for a move above 1.2770 to extend gains to 1.2850 and beyond. A break below 1.2650 will lead to 1.2610 and then 1.2550. For today, USDCAD support is at 1.2670 and 1.2650. Resistance is at 1.2720 and 1.2750.
For today, USDCAD support is at 1.2705 and 1.2650. Resistance is at 1.2750, 1.2780 and 1.2850.
Today’s Range 1.2650-1.2720
Chart: USDCAD 30 minute