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China Data Supports Commodity Currency Bloc

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

The commodity currency bloc (AUD, NZD and CAD) were the only currencies to gain against the US dollar, overnight.  Those gains were partially fueled by “mixed” to “better-than-expected” China economic data.

China May Retail Sales rose 10.7%, y/y unchanged from April but a tick better than the forecast. Industrial Production rose 6.5%, y/y beating the forecast but unchanged from April.

AUDUSD rallied from 0.7533 to 0.7586 by the New York open.  NZDUSD climbed from 0.7201 to 0.7259 in the same period.

USDCAD dropped in concert with the antipodean currencies which occurred despite a slide in oil prices.  At this point in time, traders are busy unwinding long USDCAD positions in light of the Bank of Canada’s hawkish shift in policy and ignoring the slide in oil prices.

USDJPY was lifted from 109.96 to 110.31, continuing the rally from the June 7 low of 109.12, supported by position adjustments ahead of today’s FOMC meeting.

 Sterling traded sideways in Asia and rallied from 1.2737 to 1.2794 in Europe following the UK employment report. The move was short -lived as the details weren’t very impressive.  GBPUSD dropped to 1.2728 in early New York trading.

EURUSD traded steadily within a 1.1202-1.1224 range.  Traders weren’t bothered by German CPI data which was as expected.  They didn’t care about Eurozone Industrial production (Actual 1.4% vs. forecast 1.3%) or that that Eurozone employment change was a tick higher than expected at 0.4%.

Oil prices erased all of yesterday’s gains when API reported that US crude inventories rose in the past week. WTI dropped from $46.47/b to an overnight low of $45.70.

The Paris based International Energy Agency (IEA) warned that global production in 2018 will exceed global demand

There is a lot of US data this morning which would normally spur trading activity. However, unless May CPI (forecast 2.0, y/y, ex-food and energy, forecast 1.9%) has a major upside surprise, no one will care.  The markets are expecting a “doveish” FOMC rate hike today and only surprisingly strong inflation data would change that view.

USDCAD which is already under pressure, could accelerate to the downside if today’s EIA Crude Oil Stocks change report shows a larger than expected decline in inventories (forecast -2.955 m/b) Yesterday’s API data suggests that a big decline is unlikely.

Traders expect that the FOMC will upgrade their 2017 GDP growth forecast but the uncertainty surrounding the Trump administration and its apparent dysfunction will ensure that the dot-plot forecasts remain unchanged.

Overnight Ranges

14-Jun-17 Open-6 am EDT High Low
USDCAD 1.3195 1.3242 1.3191
EURUSD 1.1206 1.1224 1.1204
USDJPY 110.21 110.24 109.96
GBPUSD 1.2742 1.2794 1.2727
USDCHF 0.9700 0.9698 0.9676
AUDUSD 0.7585 0.7586 0.7533
NZDUSD 0.7253 0.7259 0.7201
USDMXN 18.0410 18.0595 18.0148
WTI   45.88 46.13 45.75

USDCAD Technical outlook:

The USDCAD technical’s are bearish, having crushed support from the uptrend line from February, the 100 and 200 day moving averages and the breach of 1.3280 (61.8% Fibonacci retracement of February-May range.  A decisive break below 1.3210 opens the door to the 2017 low of 1.2698.

The intraday technicals are bearish while prices are below 1.3220 that is looking for a break of 1.3190 to extend losses to 1.3110.  A break above 1.3220 would lead back to 1.3260 and then 1.3290.  The 200-day moving average at 1.3330 should contain upside moves.  For today, USDCAD support is at 1.3190, 1.3160 and 1.3110.  Resistance is at 1.3230, 1.3260 and 1.3290

Today’s Range 1.3170-1.3270

Chart: USDCAD daily



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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