Loonie Ignores Oil Price Drop

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Oil prices retreated overnight, giving back all of yesterday’s gains and then some. Rising Libyan crude production (800,000 b/d) and rising US shale production combined with high crude inventories have oil bears in the oil patch.  WTI oil prices tested May uptrend line support at $48.70, when New York opened.

The decline in WTI did not phase Loonie traders.  USDCAD traded with a negative bias inside a narrow band.

Asia FX was busy.  China data, RBNZ’s Financial Stability Review and a UK election poll, kept traders on their toes.

China Manufacturing PMI (51.2) beat forecasts but was unchanged from April, but helped improve FX risk sentiment.

USDJPY opened with a bid and rallied from 110.76 to 111.21 by mid day in Japan, supported by US rate hike concerns and mildly improving risk sentiment.

Another UK poll was released.  Tory Prime Minister Theresa May appeared to be leading her party into a minority government. GBPUSD dropped from 1.2862 to 1.2771 by mid-morning in Europe.  Those losses were recovered in early New York trading, in part because of GBPUSD demand for month end.

EURUSD see-sawed in a 1.1165-95 range in Asia and early European trading.  Weaker than expected Eurozone inflation data in May (Actual 1.4% vs. forecast 1.5%, year over year) was ignored as was a small drop in the unemployment rate. Price movements are being distorted by month end flows.

AUDUSD and NZDUSD are trading well above their overnight lows thanks to the generally soft US dollar profile.

Month-end portfolio rebalancing flows will make for a choppy, volatile FX trading session. Today’s US economic data includes, Chicago PMI (Forecast 57.0) and Pending Home Sales for May (Forecast 0.5%).  They shouldn’t have much impact on FX trading.

USDCAD traders will focus on Canada GDP data. Q1 GDP is forecast jump to 3.9%, q/q (previous 2.6%) while March GDP will rise 0.2%.  Many economists think the risk is to the upside suggesting a Q1 gain of 4.5%.

A large upside surprise in Canada GDP and expected Canadian dollar demand for month-end risks serious downside pressure in USDCAD.

 Overnight Ranges

31-May-17 Open-6 am EDT High Low
USDCAD 1.3447 1.3470 1.3438
EURUSD 1.1190 1.1195 1.1165
USDJPY 110.77 111.21 110.76
GBPUSD 1.2819 1.2862 1.2771
USDCHF 0.9728 0.9759 0.9728
AUDUSD 0.7456 0.7474 0.7446
NZDUSD 0.7109 0.7116 0.7083
USDMXN 18.6680 18.7303 18.6547
WTI   48.85 49.68 48.75


USDCAD Technical outlook:

The USDCAD technicals are bearish while prices are below 1.3480 and looking for a break of support at 1.3440 to extend losses to 1.3410.  A decisive break below 1.3410 would negate the uptrend from April 13 and shift the focus to the April low of 1.3220.  A break above 1.3480 will target resistance at 1.3540, which if broken would put 1.3750 in play.  For today, USDCAD support is at 1.3440, 1.3410 and 1.3350.  Resistance is at 1.3480 and 1.3540

Today’s Range 1.3380-1.3480

Chart: USDCAD 2 hour



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Posted to: News

Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.

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