BoJ at the plate-A swing and a miss
USDCAD Open (6:00 am) 1.3157-61 Overnight Range 1.3155-1.3203 21 Sept 16
NOTE: This chart represents gain (or loss) of G10 currencies vs the US dollar from NY close (4:00pm) to Sept. 21, 6:00 am EDT
The Bank of Japan came to the plate overnight with the bases loaded, two out and down by 2. Unfortunately, they sent the wrong Josh to bat. Instead of 35 home run, MVP Josh Donaldson, it was one home-run, Josh Thole. He swung and he missed. The BoJ announced a revamped policy called “ QQE with yield curve control”. The negative 0.1% rate was unchanged and a new yield curve control target replaced its base monetary policy target. It also announced plans to over-shoot the inflation target. USDJPY sank then soared. It dropped to 101.03 and then spiked to 102.78. It is now at 101.65, just above its level before the announcement.
Elsewhere, the rally in oil prices halted a drop in the antipodean currencies and both started the New York session above yesterday’s close
For USDCAD, oil is the story and the that story is being read by the Opec Secretary General, Mohammed Barkindo. His comments that Opec is looking at a one year price stability pact kicked off yesterday’s oil rally. Oil prices got another boost due to a massive 7.49 million barrel draw down in US Crude inventories as reported by the American Petroleum Institute. Oil has soared to $45.05 (currently) from a low of $42.50 yesterday. All eyes will be on the 10:30 am EIA crude report for validation of the API data.
In Europe, EURUSD dropped on the back of USDJPY strength but the losses weren’t sustained and EURUSD is mostly unchanged from yesterdays close. That is the same story for Sterling although Brexit concerns are weighing on the currency.
USDCAD is tracking oil price movements. FX trading will be very subdued until after the FOMC statement and press conference. The majority(88%) believe that rates will be left unchanged although an argument can be made for a rate hike based on recent data and comments by Fed officials.
USDCAD technical outlook.
The intraday USDCAD technicals have turned bearish. (again). Yesterday’s failure to break above resistance in the 1.3240 area combined with the overnight break below the uptrend line at 1.3200 has turned the focus to support in the 1.3080-1.3120 area. A break here will extend losses to 1.3000. A decisive move below 1.3000 will target 1.2750. Longer term, USDCAD remains stuck within a 1.2750-1.3250 band. For today, USDCAD support is at 1.3150, 1.3120 and 1.3080. Resistance is at 1.3200 and 1.3240
Today’s Range 1.3120-1.3220
Chart: 30 minute chart showing correlation of USDCAD and WTI