Friday’s nonfarm payrolls report revealed an uptick in Average Hourly earnings for January. (Actual 2.9% vs forecast 2.3%, y/y). The US dollar soared, and equities tanked. The Michigan Consumer Sentiment Index and Factory orders also beat forecasts. The day ended with a sea of red on Wall Street and US dollar bulls strutting their stuff.
Asia markets took their cue from Friday’s US action. Asia stock markets sank, and the US dollar extended gains from the New York close. AUDUSD and NZDUSD found their session lows in early trading and then bounced, drifting higher in Europe. NZDUSD trading was a tad subdued because of a national holiday.
USDJPY gapped down at the open, bounced and then chopped about in a tight range supported by frim US treasury yields and the outlook for higher US rates.
EURUSD dropped in early Asia trading then rallied until the European open. Prices chopped about in a 1.2438-1.2472 range with the rally capped by soft Eurozone Retail Sales and Investor Confidence reports.
Sterling traded sideways until a mid-morning pop in Europe which hit a ceiling at 1.4151. Weaker than expected UK Services PMI (Actual 53.0 vs forecast 54.3) sparked a retreat and GBPUSD fell to 1.4042 as New York opened. New’s that Theresa May’s government ruled out a “Customs Union” with the EU didn’t help.
WTI oil prices dropped in Asia, in part due to the Baker-Hughs US Oil rig count rising to 765 from 758. The move didn’t last, and WTI climbed steadily into the New York open.
Global equity indices are in the red, and Wall Street futures are pointing to losses at this morning open.
USDCAD did not recover from Friday’s late afternoon headline on Bloomberg, quoting Just-an-Idiot Trudeau stating that Canada is willing to walk away from NAFTA. USDCAD spiked through resistance in the 1.2390-00 area and never looked back.
Traders may be leaning toward risk aversion trades if Wall Street extends Friday’s losses. There are a lot of extended short US dollar positions which are vulnerable to further gains in the greenback.Better than expected US Services PMI data may kick off another round of US dollar buying.
USDCAD Technical Outlook
The USDCAD technicals are bullish. Friday’s break above 1.2400, the downtrend line from December, shifted the focus from 1.2250 to 1.2550 and beyond. However, failure to take out resistance in the 1.2450-60 zone would lead to more 1.2250-1.2450 consolidation. For today, USDCAD support is at 1.2400 and 1.2360. Resistance is at 1.2460 and 1.2490.