Overnight Range 1.3256-1.3311
FX markets were fairly frothy in an active overnight session. Gold extended the rally from $1,146.09 on January 3, to touch $1,179.03 in Asia, a gain of 2.9%. It has retraced some of those gains in Europe and is currently at $1,176.00
Asia traders appeared to be less-than-impressed with the tone of the FOMC minutes. USDJPY was under pressure from the start and dropped from 117.40 to 115.56, continuing the decline that started on Tuesday from 118.65.
Do you remember the first week of January 2016? That’s when China equity markets imploded and the Renminbi devalued. China’s intervention in offshore and onshore Renminbi markets this week and fears of new capital controls added to safe-haven yen and gold demand.
Aussie and Kiwi rode the bearish dollar sentiment wave and traded higher in a move that ended when Europe opened.
European traders essentially erased the Asia FX move. EURUSD retreated and opened in New York right where it closed. Eurozone PPI data rose 0.1%, y/y in November but didn’t have any impact.
USDJPY reversed direction and almost recouped all its Asia losses. That wasn’t the case for Sterling. GBPUSD rose to 1.2364 in Asia and dropped to 1.2268 in Europe. It bounced to 1.2310 by the New York opening. Sterling traders are in their own Brexit world.
The Canadian dollar was active. USDCAD dropped to 1.3255 following the FOMC minutes and news of the 7.4-million-barrel draw down in weekly US crude inventories, as reported by the American Petroleum Institute. Those losses were reversed in Europe and USDCAD opened unchanged from yesterday’s close.
The US dollar may attract a few more bids today ahead of Friday’s employment reports and on better than expected Jobless Claims and ISM non-manufacturing data. The only Canadian data is Industrial Product Price, usually a non-factor for traders.
USDCAD Technical outlook:
The USDCAD downtrend from December 28 remains intact while prices are below 1.3420. The overnight break above 1.3275 relieved the immediate downward pressure but USDCAD needs to break above 1.3350 to suggest a period of consolidation. Only a break above 1.3420 negates the downside. For today, USDCAD support is at 1.3280 1.3250 and 1.3210. Resistance is at 1.3310 and 1.3350
Today’s Range 1.3260-1.3340
Chart: USDCAD 30 minute