The US dollar retreated in overnight markets. The greenback has fallen against the G7 currencies, except against the Japanese yen in a bout of pre-weekend profit taking.
The Bank of Japan interest rate decision and policy statement was the story in Asia. The BoJ left interest rates unchanged, as expected and left the JGB target at 0%. USDJPY rallied on the news rising from 110.85 to 111.37 where it sat at the New York open. The Nikkei closed with a 0.56% gain.
AUDUSD clawed back some of Thursday’s losses, rising from 0.7575 to 0.7607 at this morning’s open. NZDUSD tracked AUDUSD higher.
EURUSD bounced from the overnight low of 1.1140 to 1.1180 on profit taking. Eurozone May inflation was “as expected” (Actual 1.4% vs. forecast 1.4% y/y) which supports Mario Draghi’s doveish view. EU officials solved the Greece debt relief problem, for the time being. They gave Greece another EUR8.5 billion and then said “talk to you later”.
EURUSD traded sideways in Asia but sank to 1.1153 in Europe. The prospect of another US rate hike in 2017 while the ECB policy stays unchanged weighed on the currency pair.
GBPUSD traded sideways inside a 1.2752-1.2784 range, supported by the prospect that the Bank of England could raise interest rates as early as August. Of course, that is assuming that the Brexit negotiations, which start next week, go smoothly.
Oil prices are still under pressure. WTI traded in a narrow $44.32-76 band, weighed down by bearish technicals and the supply/demand imbalance.
USDCAD traded quietly but maintained its bearish bias. The Deputy Governor’s signal of a hawkish policy shift on Monday, followed by Stephen Poloz’s confirmation of her remarks, drove USDCAD below the 100 and 200 day moving averages and hung a target on the February low of 1.2965.
The prospect of another US rate hike should put a flor under US dollar weakness, especially if today’s US Housing Starts, Building Permits and Michigan consumer confidence reports exceed forecasts. However, the next FOMC meeting isn’t until July 25-26, and it is a statement only meeting, so a rate hike is unlikely then.
For the rest of the day, US dollar direction will be driven by equity and oil price swings as well as the political drama from Washington.
|16-Jun-17||Open-6 am EDT||High||Low|
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish while prices are below 1.3290 looking for a break of support at 1.3165 to extend losses to 1.2965. The short term technical out look is bearish while prices are below 1.3400 the downtrend line being guarded by resistance from the 100 and 200 day moving averages which are 1.3382 and 1.3336., respectively. For today, USDCAD support is at 1.3180 and 1.3160. Resistance is at 1.3280 and 1.3340.
Today’s Range 1.3180-1.3280
Chart: USDCAD 2 hour
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