North Korea’s olive branch to the west and Tump’s back-down on tariff helped improve global risk sentiment to start the week. However, the improvement in sentiment did not translate into FX volumes. Asia equity indices rallied on the improved risk sentiment. The US dollar opened in New York with very tiny losses against the majors.
A brewing political scandal in Japan led to USDJPY bouncing erratically in a 106.37-106.96. The government wants people to believe that the sale of public land (at an 85% discount) to a school operator with ties to Prime Minister Abe’s wife, was just “business as usual.”
AUDUSD was perky, even though it was a holiday after Australian Prime Minister Malcolm Turnbull confirmed that Australia was exempt from Trump’s new tariffs. AUDUSD rose from 0.7847 to 0.7878. NZDUSD rallied with the Aussie.
EURUSD drifted higher in early trading, then reversed the move after comments from ECB Benoit Coeure that “inflation is not where the ECB wants it to be.” Prices rose from 1.2307 to 1.2340 and then retreated to 1.2312 at the New York open.
Sterling traded sideways in an uneventful session. A German industry lobby group wants the EU to agree to a customs union with the UK, to limit the impact on trade after Brexit.
Oil prices rallied in Asia after the Baker Hughs rig count showed a decline in US rigs. On the other hand, Reuters reports that speculators have been large sellers of oil contracts, betting US production increases will offset Opec cuts.
The Canadian dollar was the only FX major to lose ground against the greenback, although the loss was tiny. Friday’s “blow-out” US employment data which elevates the risk for faster and higher Fed rate hikes combined with heightened Trade risks underpinned USDCAD. Canada’s employment data was soft, which has limited USDCAD downside moves.
There is not any data of note from the US or Canada leaving Wall Street to guide FX direction.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish while prices are above 1.2810 looking for a break above 1.2860 to re-target the 1.2990 area, although 1.2915 will provide some resistance. A break below 1.2810 shifts the focus to 1.2650 on a break of support at 1.2760. For today, USDCAD support is at 1.2810 and 1.2780. Resistance is at 1.2860 and 1.2890
Today’s Range: 1.2790-1.2860