US Q3 GDP rose 3.3%, as expected. Nevertheless, it was viewed as good for the greenback and the US dollar rallied, especially against the Canadian dollar. USDCAD was 1.2807 before the release and 1.2856, immediately afterwards. EURUSD fell from 1.1830 to 1.1817, and USDJPY rallied to 112.05 from 111.60.
With the data out of the way, the focus shifts to Fed Chair Yellen’s Congressional testimony. She is expected to “stay the course,” suggesting little or no FX impact from her speech. Traders are more concerned with prospects of the Republicans getting a tax reform deal passed.
Overnight, Brexit and North Korea continued to roil markets.
Yesterday afternoon, Britain’s famous “stiff-upper-lip” got bloodied. It was punched by news the UK government caved to EU demands and agreed to pay a reported €50 billion, “get-out-of EU” fee. Sterling traders were pleased as it signals that the next phase of trade negotiations can begin.
GBPUSD soared, rising from 1.3222 to 1.3383 by the end of the day in New York. Prices were steady in Asia, and the rally resumed in Europe, reaching 1.3429 Sterling is consolidating the move in a narrow 1.3390-1.3429 band
EURUSD traders took the Brexit news in stride. The singled currency stayed within a 1.1841-1.1881 range. A 17 year high in the Economic Sentiment Indicator (Actual 114.6) boosted EURUSD initially but the move faded. EURUSD traders remain torn between ECB tapering and Euro area growth and US tax reform stimulus and Fed rate hikes. EURUSD has bounced to 1.1835 from a post GDP low of 1.1818.
Asia opened with news that North Korea launched another ICBM into the Sea of Japan. It didn’t make a splash. The initial shift toward safe-haven trades was quickly reversed. USDJPY was range bound in a 111.38-111.65 band. Japan Retail Sales data didn’t have any impact. The US GDP data did. USDJPY popped to 112.05 where it is at the time of writing.
The antipodean currencies were mixed. AUDUSD drifted lower while NZDUSD inched higher.
Oil prices dropped in Asia after API reported a small increase in US crude inventories. Prices recovered in Europe ahead of tomorrow’s Opec meeting announcement. Opec is expected to extend production cuts for all of 2018, with an early end option in June. This morning Saudi Arabia’s oil minister expressed satisfaction about how the production cuts were working and suggested that the proposed extension would be approved.
USDCAD Technical outlook:
The intraday USDCAD technical are bullish while prices are above 1.2810 looking for a decisive break above resistance in the 1.2835-40 area to extend gains to 1.2860 and then 1.2915. A break below 1.2810 will lead back to 1.2740. For today, USDCAD support is 1.2810 and 1.2740. Resistance is at 1.2860 and 1.2915.
Today’s Range 1.2770-1.2860