Canadian Dollar Update October 10, 2019 – Canadian Dollar stays rangebound
USD/CAD Open: 1.3331-1.3332 Overnight Range: 1.3272-1.3345
Oil is at $53.22 and gold is at $1,498.50. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3336. Support is at 1.3279.
The Canadian dollar remains locked in a narrow trading range. The USDCAD 1.3290-1.3345 trading band has contained price action since October 3, but events are coming to a head which could re-draw the trading boundaries, again.
The minutes from the Federal Open Market Committee (FOMC) September 17-18 meeting were released yesterday afternoon. They reinforced the odds of an October 30 rate cut since according to the minutes “for most participants, that economic outlook was premised on a somewhat more accommodative path for policy than in July. Participants generally had become more concerned about risks associated with trade tensions and adverse developments in the geopolitical and global economic spheres.”
US dollar sentiment turned negative following the FOMC minutes, and the greenback finished the New York session with losses across the board. The selling pressure resumed in Asia and continued in Europe, and in early Toronto trading this morning, exacerbated by China/US trade talk speculation.
The face-to-face US/China trade negotiations resume today amidst a swirl of news and rumours. The South China Morning Post reported that trade talks, at the deputy level, didn’t make any progress. The US wants a resolution to what they call “forced technology transfers” while China refuses to discuss it. Other problems are about China state subsidies and these talks are occurring under the threat of a tariff bump on Chinese imports starting October 15.
However other reports said China was open to a partial US trade deal, provided the new tariffs are scrapped.
FX traders focused on the positive rumours which sparked new “risk-seeking” trades. EURUSD managed to rally to 1.1032 from 1.0972 along with the commodity currency bloc. EURUSD traders ignored weaker than expected German trade data.
GBPUSD traders appeared to have forgotten about the rising risk of a “no-deal Brexit.” GBPUSD climbed from 1.2205 to 1.2264 on the back of the broad US dollar weakness while ignoring a slew of weak economic reports. UK August GDP fell 0.1%. However, the sting was soothed by the upward revision to the July result. Manufacturing and Industrial production data were below expectations.
USDJPY climbed to 107.76 from 107.04, boosted by US dollar weakness, and the unwinding of some safe-haven trades on hopes of a US/China trade deal. US 10-year Treasury yields bounced off their overnight low of 1.554% to 1.587% which added to USDJPY support.
Positive trade talk sentiment drove AUDUSD and NZDUSD higher. Both currency pairs got an added lift from better than expected economic data. Nevertheless, their short-term downtrends are still intact.
Traders are awaiting this morning's US inflation data. An upside surprise could kick off a new round of US dollar buying if it leads to lowered rate cut expectations.
Today’s Suggested Range USD/CAD: 1.3280 – 1.3380
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