Loonie a bystander in lively overnight session 20Nov14


USDCAD Open 1.1340-45 Overnight Range 1.1340-68

Loonie a bystander in lively overnight session

The Loonie was mostly a spectator in an active FX market that started in Asia when the HSBC China PMI missed forecasts. (Actual 50.0 vs. forecast 50.8 driving Aussie and kiwi lower. USDJPY punched through various resistance levels above 118.00, flirted with 119.00 and the quickly retreated. EURUSD was choppy, undermined by soft German Manufacturing and Services PMI while Cable caught a bid on stronger than expected Retail Sales. Today’s US CPI and Home Sales data will be the focus for the North American session.

The FOMC minutes came and went and left bulls and bears wanting. They were deemed to be doveish but that was mostly splitting hairs. The fact remains that the FOMC was unconcerned about inflation and remains on track to hike interest rates.

USDCAD technical outlook

The intraday and short term USDCAD technicals are bullish targeting a break of 1.1360 to ignite another rally and revisit of the 2014 high. Long term Fibonacci analysis suggests that 1.1660 is in the picture. Only a decisive move below the 1.1240-60 area would negate the upside pressure. For today, a break below support at 1.1320 sets up another test of 1.1280 while a move above 1.1360-70 puts 1.1410 in play.

USDCAD fundamentals

The fundamental picture for USDCAD is a lot less clear than the technical outlook. Key domestic drivers of the domestic economy including manufacturing shipments, unemployment and inflation have been steadily improving eroding a large part of the bearish Canadian dollar rationale. Canada is also the first G-7 nation since 2008 to post both a budget and trade surplus. Combined, the data implies that the US economic rebound has spilled into Canada. Naturally, there is a but, and like Kim Kardashian’s it is a big but.

The outlook for WTI oil is still negative while trading below $80.00/bbl. Additional WTI weakness through $73.00 could spark another USDCAD rally above 1.1550. The other wild card is the general perception of the FOMC intentions. The market is pricing in a rate hike further out than the Fed’s own dot-plot estimate shows it to be. Any evidence that the Fed would be raising rates sooner than expected would fuel USDCAD demand.

Today’s Range: 1.1305-1.1370

Categories FX, Foreign Exchange, Currency, Canadian Dollar

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