May 6, 2019
USDCAD Open (6:00 am EDT) 1.3473-76 Overnight Range 1.3446-1.3491
Global equity indices tanked, and FX trader’s scrambled for safe-haven currencies after a President Trump tweet:
He wrote: “For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars…. ….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
The US dollar gapped higher at the Asia open and was holding on to most of those gains when New York opened. The moves may have been exaggerated because the UK was closed, which sucked up a ton of FX liquidity.
China wasn’t impressed with the US to start with. They were a tad irked by US warships sailing around the Taiwan Strait on April 29, calling it “provocative actions.” However, they appear to be ignoring Trump’s trade tirade and still plan to continue trade talks in Washington starting Wednesday.
EURUSD is nearly back to Friday’s closing price supported by better than expected Services PMI, Investor Confidence data, and Retail Sales. German Services PMI also beat forecasts.
GBPUSD soared Friday, rising from 1.2989 to 1.3175 after reports the UK Labour and conservative parties would work together to get a Brexit deal approved. Trump’s tweet took the bloom off that rose and GBPUSD dropped from 1.3175 to 1.3108 overnight.
USDJPY dropped to 110.29 from a closing level of 111.09 on the back of safe-haven yen demand although the magnitude of the drop may have been exaggerated by poor liquidity as Japan was still closed for Golden Week.
AUDUSD and NZDUSD declined on Trump’s tweets but they were already under pressure ahead of central bank meetings on Tuesday, and Wednesday/ The RBNZ is expected to cut rates while it is still a close call with the RBA.
Oil prices gapped lower, plunging from $61.87/b at Friday’s close to $60.07/b on US/China trade talks concerns. They rallied in Europe and opened in New York at $61.15/b.
USDCAD rallied on the back of broad US dollar weakness and the steep drop in oil prices. Bullish USDCAD technicals and weak economic data last week did not help sentiment.
There isn’t any US or Canadian economic data available today leaving Wall Street price action and trade talk headlines to dictate direction. BoC Governor Poloz speaks about “Economic Flexibility, Housing and the Future of Mortgages” in Winnipeg at noon today.
USDCAD Technical Outlook
The USDCAD uptrend line from October 2018 is intact while prices are trading above 1.3260 but gains have been capped at 1.3620. The intraday price action has been contained in a 1.3370-1.3490 range for the past week and prices are in an uptrend above 1.3410. For today, USDCAD support is at 1.3440 and 1.3410. Resistance is at 1.3490 and 1.3520. Today’s Range 1.3420-1.3490
Chart: USDCAD daily