Asia FX markets were thrown into turmoil when they opened, after headlines shouting “White House Chief Economic Adviser Quits. ” Gary Cohn resigned in protest of President Trump’s planned steel and aluminium sanctions.
USDJPY plunged, falling from 106.17 to 105.46 and AUDUSD dropped to 0.7773 from 0.7827. The Japanese yen was bought because of risk aversion sentiment while AUDUSD dropped to trade war fears. Aussie recovered most of the losses by the New York open. Traders were nonplussed by a slightly softer-than-expected Q4 GDP reading (Actual 0.4% vs forecast 0.6%, q/q). USDJPY stayed near the overnight lows with yearend position also flows a factor.
EURUSD drifted higher ahead of Thursday’s European Central Bank meeting. Mario Draghi and company are expected to leave rates unchanged but tweak the forward guidance, committing to QE end date. Eurozone Q4 GDP was as expected at 0.6%, q/q.
GBPUSD peaked in Asia at 1.3910 and traded down in Europe. Brexit worries overshadowed a small rise in February Halifax House Price index (Actual 0.4% vs forecast 0.3%)
WTI oil prices never fully recovered after they dropped from $62.50 (yesterdays close) to $61.82 when the American Petroleum Institute announced a 5.66 million barrel increase in crude inventories. WTI opened at $6116/b. Gold prices jumped to $1,340.40 from $1,333.52 after the Cohn resignation news the retraced the entire move by the New York open.
Global equity indices are all lower due to trade war fears. US equity futures point to a sharply lower Wall Street open.
USDCAD has been whipped around like a squash ball in a championship match. After touching 1.2991 yesterday in Europe, prices plummeted to 1.2861 in Toronto after headlines suggesting North Korea would scrap their nuclear program. That euphoria dissipated. So did trade war fears. There was a lot of chatter Tuesday morning and in the early afternoon implying Trump’s tariff threat was just a negotiating ploy. Oops. Gary Cohn’s resignation lifted the threat level, and USDCAD rallied.
The Bank of Canada policy statement is not likely to provide any relief. Domestic rates are expected to be unchanged, and the statement will be vaguely cautious. I’m guessing that the Bank of Canada will be loath to talk of rate increases while President Trump is dropping trade bombs.
Canada and US trade data may garner a bit more attention than usual this morning.
USDCAD Technical Outlook
USDCAD is consolidating recent gains inside a 1.2860-1.2990 range and needs to break either side of this band to determine the next 0.0100 points. The momentum indicators are suggesting that USDCAD is overbought, however uptrends from January and the end of February are still in place. Topside resistance is sticky between 1.2990 (double top), 1.3000 (round number and 1.3020. Above 1.3020 opens the door to 1.3150. A break below 1.2770 is need to negate the upside pressure. For today, USDCAD support is at 1.2915 and 1.2860. Resistance is at 1.2960 and 1.3015.
Today’s Range: 1.2915-1.3015