Commodity prices are lower and the commodity bloc currencies are under pressure. A weaker than expected Caixin China Services report (Actual 51.5 vs. forecast 52.6) undermined AUDUSD and NZDUSD in Asia. Traders ignored the better than expected Australia Trade report but not the weaker ANZ Commodity price index.
The USDCAD see-sawed inside a 1.3700-50 band supported by soft oil prices and fresh US rate hike expectations for June. Yesterday’s FOMC meeting left the door wide-open for a June hike. The CME Fed watch odds jumped from 63.2% yesterday to 78.5% after the FOMC statement.
This morning, StatsCanada announced that the Canadian trade deficit narrowed to $135 million from a $1.1 billion deficit in February, led by a 3.8% rise in exports. That news gave the Canadian dollar a bit of a reprieve and USDCAD dropped from 1.3740 to 1.3707.
Source: Statistics Canada
The US data was better than expected and supported calls for a June rate hike. Initial Jobless Claims dropped to 238,000 after posting 257,000 last week and the US Trade deficit narrowed as well. However, that news didn’t have much impact on EURUSD or GBPUSD which continued to trade at their overnight peaks.
EURUSD and GBPUSD continue to be supported by today’s better than expected by upward surprises to Markit Services PMI data. The Euro got an added boost by polls suggesting that Emmanuel Macron would easily defeat Marine Le Pen in Sunday’s election.
The oil price decline that began in the middle of April is still in full bloom. WTI dropped from $48.16 to $47.34 overnight and is now at the mid-point of the range. Concern that Opec production cuts have not corrected the over-supply situation and fears that they won’t be extended have undermined prices.
ECB President Mario Draghi delivers a speech around 1:00 pm EDT and BoC Governor Stephen Poloz speaks in Mexico, at 5:00 pm EDT.
USDCAD Technical outlook:
The USDCAD technicals haven’t really changed. The intraday and short term technicals are bullish. USDCAD is in an uptrend channel that began on April 17 and stays intact while prices are above 1.3690. A break above 1.3750 opens the door to 1.3840 and then 1.4000. A move below 1.3690 suggests a correction to 1.3610 is likely. For today, USDCAD support is at 1.3680 and 1.3630. Resistance is at 1.3750 and 1.3840 However, the Bollinger bands and momentum indicators suggest that USDCAD is ripe for a correction.
Today’s Range 1.3680-1.3750
Chart: USDCAD daily
Source: Saxo Bank