Loonie rising ahead of Bank of Canada
USDCAD Open (6:00 am) 1.2890-94 Range (Friday close Tuesday 6 am) 1.2889-1.2990 6 Sept16
NOTE: This chart represents gain (or loss) of G10 currencies vs the US dollar from NY close (4:00pm) to Sept. 1, 6:00 am EDT
Welcome back!. The USDCAD decline precipitated by the weak US employment report continued unabated on holiday Monday and in overnight markets. The broad shift out of US dollars across the G10 spectrum due to greatly diminished September rate hike expectations overshadowed falling oil prices leading to stop loss selling of USDCAD on the break below 1.2940.
Monday started with a lot of comments from the G20 meeting in China although none of them had any impact on FX markets. USDJPY declined from 104.14 to 103.14. EURUSD bounced within a 0.0050 point range ignoring weaker than expected Eurozone PMI data. UK service PMI gave GBPUSD a short lived boost.
On Tuesday, the RBA didn’t provide any surprises and left interest rates unchanged. The statement acknowledged that the global economy was growing at a lower than average pace, a comment which may be in today’s Bank of Canada statement as well. AUDUSD and NZDUSD are well-above Friday’s close with a chase for yield providing some support. Eurozone GDP came in as expected which helped EURUSD.
Saudi Arabia and Russia said they agreed to cooperate in world oil markets They also said that they wouldn’t act immediately but could limit output in the future. The news was rightfully ignored.
The Bank of Canada interest rate statement is due at 10:00 am. There isn’t any doubt in anyone’s mind that domestic rates will be left unchanged. However, one camp expects that the outlook will be adjusted downward which could put a floor in USDCAD around the 1.2850 area.
USDCAD technical outlook.
The intraday USDCAD technicals are bearish. The break below support at 1.3000 and 1.2940 has the uptrend line from the mid-August low under assault and put a target on 1.2840. In addition, the move below 1.2908 (61.8% Fibonacci retracement of August-September 1.1.2760-1.3150 range) suggests further losses to the 76.4% level of 1.2852. A break below 1.2840 opens up a move to 1.2660. A break above 1.2960 would negate the downward pressure and shift the focus back to 1.3050. for today, USDCAD support is at 1.2880, 1.2840 and 1.2810. Resistance is at 1.2930, 1.2970 and 1.3010.
Today’s Range 1.2840-1.2940.
Chart: USDCAD 1 hour