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Cautious Yellen Undercuts US dollar

Categories: AUD, CAD, EUR, GBP, Markets, News, USD

Fed Chair Janet Yellen through cold water on hopes for a hawkish-sounding Congressional testimony yesterday. She was on the side of the doves.

Her testimony started out favouring the hawkish expectations as she ticked off improvements in the economy, employment, global economic growth, and consumer spending.  Then she went and spoiled it by saying that the Committee would “adjust their assessments and the appropriate path for federal funds in response to changes in their economic outlooks.”

Markets took that comment to mean that interest rates won’t be rising very fast.  They sold US dollars, bought bonds, and bought equities.

US dollar selling continued in Asia. The antipodeans climbed on the doveish Yellen testimony and strong China Trade data.  For the record, China’s June Trade balance was $42.77 billion vs May 40.70 billion.  Exports rose 11.3%.

AUDUSD climbed from a low of 0.7676 to 0.7737, where it was at the New York open.  NZDUSD rallied from 0.7248 to 0.7346 and is also at its peak at the start of New York trading.

USDJPY sank from 113.51 to 112.86 on slipping Treasury yields following Ms. Yellen’s speech and then spent the rest of the overnight session either side of 113.00

EURUSD climbed steadily in Asia rising from 1.1412 to 1.1455 in early European trading.  That was all. It dropped down to 1.1386, close to where it opened today.

Oil prices slipped on news that Saudi Arabia exceeded its production quota in June.  The Saudi’s explained that they needed the extra production to serve power plants to meet air conditioning demand.

Meanwhile, the IEA said that several Opec members pumped more crude than allowed under the production cut agreement.

USDCAD consolidated yesterday’s impressive gains, trading in a 1.2727-63 range. Oil prices, which are well above Monday’s low and a hawkish Bank of Canada outlook will limit topside gains.

The usual Thursday US Jobless Claims data will be complemented by the Producer Price index (forecast 0.0%, m/m in June). Fed Chair Yellen continues her testimony, this time with the Senate Banking Committee.  If she was unhappy with how her remarks were interpreted yesterday, she could address the issue today.

Canada’s New Housing Price index won’t cause much of a stir.

Overnight Ranges

13-Jul-17 Open-6 am EDT High Low
USDCAD 1.2736 1.2763 1.2727
EURUSD 1.1397 1.1455 1.1386
USDJPY 112.97 113.51 112.87
GBPUSD 1.2924 1.2951 1.2884
USDCHF 0.9649 0.9656 0.9617
AUDUSD 0.7738 0.7737 0.7676
NZDUSD 0.7337 0.7336 0.7248
USDMXN 17.7158 17.7974 17.7166
WTI   45.11 45.55 45.01

 USDCAD Technical outlook:

The USDCAD technicals are bearish.  Yesterday’s break of 1.2772, the 76.4% Fibonacci retracement level of the 2016-2017 range has hung a target on the 10-0% level, 1.2458.  However, it won’t be a one-way street. 1.2650-60 support proved unbreakable in June/July of 2016 and yesterday’s plunge stalled at 1.2680, just above that level. The short-term downtrend from 1.3340 is intact while prices are below 1.2970, a level being guarded by resistance at 1.2860 and 1.2770.   For today, USDCAD support is at 1.2710 and 1.2660.  Resistance is at 1.2770 and 1.2820.

Today’s Range 1.2670-1.2770

Chart: USDCAD weekly noting long term uptrend

usdcad-weekly-chart

 

Agility Forex Author: Agility Forex

Agility Forex is a Canadian cross-border payment specialist. They are Canadian owned, operated out of Vancouver and are registered with Fintrac, the Canadian government agency that oversees the money transfer industry. They specialize in all things Canadian Dollar and aim to provide the best service and best pricing on all Loonie cross rates. Visit Agility Forex.

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