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The Canadian dollar bounced erratically inside a 1.2803-1.2855 range overnight. “FX traders were torn between concern about a hawkish Fed and a mildly hawkish Bank of Canada in a high oil price environment.” Said Rahim Madhavji, President of KnightsbridgeFX, a currency exchange company that helps Canadians get better exchange rates than the banks.
Bank of Canada Governor Stephen Poloz delivered a speech in Yellowknife, yesterday afternoon. He didn’t stray too far from the earlier Bank of Canada statement or his testimony to the Senate Banking Committee. He reiterated that Canadian interest rates were going higher as temporary restraints on the economy faded. Higher interest rates typically bode well for the Canadian dollar.
The Canadian dollar has not been getting much support from the high oil prices. WTI has traded above $66.90/b since the middle of April supported by talk that Opec/Russia are considering extending production cuts into 2019 and the threat of new oil sanctions against Iran. Price gains have been contained by rising US oil production. Historically, the Canadian dollar follows oil directionally.
The Canadian dollar technicals (USD/CAD) are neutral while prices stay inside the 1.2800-1.2900 that has contained price action since April 24. A break above resistance in the 1.2950 area would target the 2018 peak of 1.3125 while a move below 1.2750 would extend losses to 1.2500.
The Federal Open Market Committee (FOMC) meeting, is today with the policy statement being released at 2:00 pm. There isn’t any economic projections or a press conference. Economists and analysts do not expect any change in rates. The statement is expected to be very similar to the March 21 statement although there is a risk for an upside tweak to growth expectations. The US dollar is vulnerable to a sharp sell-off in the event of a dovish result.
Elsewhere, GBPUSD rallied from 1.3585 to 1.3662 on a wave of pre-FOMC profit-taking after UK Construction PMI data surprised to the upside.
EURUSD rallied when the Eurozone PMI index surprised to the upside. Unemployment and Q1 GDP data were as expected.
Asia was fairly quiet except for a few brief moments around economic reports. NZDUSD climbed after the New Zealand unemployment rate fell to 4.4%, a nine-year low. The Australian dollar jumped because of an upside surprise to China Manufacturing PMI data.
This morning, the US ADP employment report is due and expected to show a gain of 200,000 jobs. Some traders use this report as an indication of the nonfarm payrolls results.
FX trading is likely to be subdued until the FOMC meeting.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
FX Ranges
|
2-May-18 |
Range |
|
30-Apr-18 |
|
Open |
High |
Low |
close |
EURUSD |
1.2003 |
1.2030 |
1.1983 |
1.1993 |
USDJPY |
109.82 |
109.91 |
109.65 |
109.87 |
GBPUSD |
1.3657 |
1.3662 |
1.3582 |
1.3613 |
USDCHF |
0.9951 |
0.9968 |
0.9938 |
0.9966 |
AUDUSD |
0.7511 |
0.7528 |
0.7477 |
0.7487 |
NZDUSD |
0.7019 |
0.7030 |
0.6994 |
0.6998 |
USDCAD |
1.2823 |
1.2855 |
1.2805 |
1.2858 |
GOLD |
1,310.85 |
1311.79 |
1304.71 |
1305.05 |
WTI |
67.53 |
67.82 |
67.82 |
67.41 |
