The third estimate for GDP was lower than expected. US Q4 GDP rose 2.2% y/y, below the forecast for a 2.4% increase and well below the previous reading of 2.6%. Last week’s soft Retail Sales reported contributed to the weakness. US Initial Jobless Claims were better than expected.
The US dollar closed yesterday with small gains across the board and opened this morning on a mixed note. Since then the US dollar has reasserted itself and it is trading higher against all the major currencies. Once again, Sterling garnered all the excitement, and the Japanese yen flirted with risk aversion demand.
USDCAD starts today’s session near the top of its overnight range. Prices are supported by softer oil prices and bullish technicals. News that China banned Canadian canola shipments from two Canadian shippers may also be adding a layer of support to the currency. The Federal government is considering sending a delegation to China, but since the canola ban does not impact Quebec interests, it may not be a high priority. Traders are looking ahead to Friday when Canada January GDP data is released.
GBPUSD rode another roller-coaster overnight, falling from 1.3250 to 1.3127, climbing back to 1.3195 before falling to 1.3135 in early New York trading. British MP’s voted on eight motions in an attempt to find common ground and avoid a “no-deal Brexit. They didn’t pass any. Prime Minister May promised to quit if the House passed her Brexit deal. Ireland’s DUP party said they would not support it.
EURUSD continues to be weighed down by yesterday’s dovish comments from ECB President Mario Draghi who hinted that ECB rates would remain unchanged until well into 2020. Eurozone Economic Sentiment Indicator, Business climate and Services Sentiment indicators were all a tad weaker than expected. EURUSD traded lower following the release.
USDJPY dropped to 110.03 from 110.51 mild risk aversion sentiment, but prices rallied back to 110.27, supported by a tiny rise in US 10-year Treasury yields.
AUDUSD and NZDUSD rallied in Asia on profit-taking following earlier losses but pared those gains in European trading.
There isn’t any Canadian data. US data includes US Q4 GDP (forecast 2.4%), Jobless Claims and PCE prices. A flock of Fed speakers are scheduled throughout the day
USDCAD Technical Outlook
The USDCAD technicals are unchanged from yesterday. They are bullish but prices are conolidating recent gains in a 1.3380-1.3440 range A topside break would restart the rally and target 1.3550 and 1.3650. However, a break below 1.3380 suggests further conolidation in a wider, 1.3300-1.3440 band. For today, USDCAD support is at 1.3380 and 1.3340. Resistance is at 1.3440 and 1.3460.