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EURUSD and crude oil gains leading USDCAD lower. China's Xi adds to "risk-on" mood. Canadian Housing Starts/US PPI at 8:30amET.

CXI April 10th, 2018


  • USDCAD: Dollar/CAD is entering North American trading this morning in rough shape.  It all started with the breakout higher in EURUSD yesterday, which we alluded to.  Then we saw a strong rally in crude oil prices and an upbeat Business Outlook Survey from the Bank of Canada, which were nice backdrops for USDCAD shorts.  China’s President Xi added to the “risk-on” mood overnight by taking a conciliatory tone on trade and globalization in his speech at the Boao Forum in Asia.  This was a green light for further buying in AUDUSD (which closed NY trading yesterday with a bullish outside day pattern) and further selling in USDCAD (which closed NY trading yesterday well below 1.2725 support).  USDCAD selling is picking up steam again now as EURUSD is surging higher on headlines from the ECB’s Nowotny (“ECB COULD LIFT DEPOSIT RATE TO -0.2 PCT FROM -0.4 PCT TO START PROCESS OF RATE HIKES”) and headlines from Saudi Arabia (“SAUDI ARABIA IS SAID TO SIGNAL AMBITION FOR $80 OIL PRICE”).  The market has just bounced off support in the 1.2660s, and this level will be key to watch today in light of the broad USD sell off that is now underway again.  A break below will have traders focused on 1.2625-40 level and the 100 point air pocket beneath there.  The CAD crosses are benefiting a bit from the ECB headlines but EURCAD has resistance at 1.5675 to deal with and GBPCAD needs to overcome 1.8000 before positive momentum to return.  We think USDCAD catches a short term break here as AUDUSD backs off its own resistance in the 0.7740s and traders await the Canadian Housing Starts and US PPI data at 8:30amET, but we think USDCAD remains vulnerable to the downside as there’s no real resistance on the EURUSD chart for at least another 40 pts higher.  A NY close above 1.2700 is now needed to arrest the downward momentum in USDCAD.

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