Commodity-related currencies are on fire today!
But USD/CAD has already dropped sharply.
Can the pair extend its anti-USD moves ahead of today’s U.S. and Canadian data releases?
Before moving on, ICYMI, yesterday’s watchlist checked out EUR/USD’s potential trend pullback resistance ahead of lower-tier data releases from the U.S. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. GDP, final read for Q2 2023: 2.1% (2.1% forecast; 2.2% previous); PCE Price Index: 2.5% q/q as forecast; Core PCE Prices 3.7% q/q as forecast vs. 5.0% q/q
U.S. weekly initial jobless claims: 204K (205K forecast; 202K previous)
U.S. Pending Home Sales: -7.1% m/m (0.2% m/m forecast; 0.5% m/m previous)
FOMC member Goolsbee hinted that it’s possible to lower inflation without a recession
Tokyo’s core CPI rose 2.5% y/y in September (vs. 2.6% expected, 2.8% previous) amidst some cooling in consumer spending
Japan’s unemployment rate remained at 2.7% in August (vs. 2.6% expected) as the number of unemployed rose by another 10K
Japan’s retail sales were unchanged at 7.0% y/y in August (vs. 6.6% expected); monthly retail activity edged up by 0.1% after a 2.2% growth in July
Australia’s private sector borrowing accelerated from 0.3% m/m to 0.4% m/m in August
Japan’s consumer confidence worsened for a second consecutive month, down from 36.2 to 35.2 in September, with all sub-indices registering decreases
Japan’s housing starts dropped by 9.4% y/y in August (vs. -8.7% expected, -6.7% previous); new construction contracted in all categories including owned, issued, rented, and built for scale
Price Action News
Retracement was the name of the game during the Asian and early U.K. sessions as intraweek trends saw pullbacks. Global bond selloffs eased and crude oil and the U.S. dollar retraced some of their weekly gains.
It also helped over market sentiment that recent price growth data from the Eurozone saw decelerations in consumer price gains. This meant less pressure on the ECB to raise its interest rates further and possibly choke growth.
A risk-friendly trading environment favored “risk” assets including AUD and NZD. Both comdolls gained across the board but the New Zealand dollar edged its Australian counterpart just a little bit higher today.
Upcoming Potential Catalysts on the Forex Economic Calendar:
U.K.’s mortgage approvals and individual lending at 8:30 am GMT
Eurozone’s core CPI flash estimate at 9:00 am GMT
Canada’s monthly GDP at 12:30 pm GMT
U.S. core PCE price index at 12:30 pm GMT
U.S. personal income and personal spending at 12:30 pm GMT
U.S. Chicago PMI at 1:45 pm GMT
U.S. Revised UoM consumer sentiment at 2:00 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
USD/CAD: 15-min
Traders felt like taking risks and dumping the U.S. dollar today! While the Australian and New Zealand dollars got the bulk of the risk-taking, traders also didn’t sleep on the Canadian dollar.
USD/CAD is trading near 1.3430 today, waaay lower than its intraday highs above the 1.3500 handle.
As you can see, the pair already busted through its S2 (1.3450) Pivot Point line and it looks like it’s headed for the 1.3425 previous low.
Interestingly, the 1.3420 zone tracks with the full 65(ish)-pip average daily volatility of USD/CAD. If the pair’s selloff can lose momentum, it may do so in this area.
Today’s U.S. and Canadian data releases will probably decide how low USD/CAD can go. Markets expect the U.S. core PCE – the Fed’s preferred inflation gauge – to maintain its 0.2% monthly increase and record decent consumer income and spending gains for the month.
Meanwhile, Canada’s GDP could record a 0.1% gain after decreasing by 0.2% in June.
If today’s economic reports highlight the Fed’s hawkish biases, then USD/CAD could turn higher and go back up to inflection points like 1.3450 or 1.3470.
But if U.S. and late London session traders lean into the USD-selling party, then USD/CAD may drop all the way to the 1.3400 major psychological handle.
