NY Open: Who let the bears out?
There's a storm blowing down Wall Street as yesterday's tech rout gathers pace and blasts leading indices lower still, while in FX, a resurgent greenback picks off the G10 majors.
FX markets are close to a state of inertia. The intraday to-ing and fro-ing in the major G-10 currency pairs is just noise, akin to the sound of beer sloshing in the glass as you move from the bar to the patio chair. Summer markets, a dearth of data, possible event risk and Thursday’s European Central Bank meeting have encouraged traders to stay on the sidelines.
President Trump has set the stage for a hostile meeting with European Union Council President Jean-Claude Juncker. His tweet last night says it all. “The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers, and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready - but they won’t!” Hardly the words of a man expecting a positive result.
Wall Street opened flat. The DJIA was a tad lower while the S&P 500 and NASDAQ were modestly higher.
The US dollar drifted lower since New York opened, but only the Canadian dollar shows signs of breaking out of its recent range. USDCAD inched slowly lower after peaking at 1.3160 overnight. Prices broke below minor support in the 1.3120 area. USDCAD traders are optimistic about the trade talks around Nafta and are expecting a positive result to be announced shortly. Their optimism may be misplaced. US and Mexico trade representatives are meeting as are Canadian and Mexico reps, but Canada and the US aren’t talking. Earlier this week, President Trump appeared to put a Mexico trade deal ahead of a Canadian deal, and his feud with Canada’s Prime Minister Trudeau supports that view. Nevertheless, the intraday USDCAD technicals are bearish while prices are below 1.3150 with this morning’s drop below 1.3120 targeting support in the 1.3050-60 area.
Chart: USDCAD 4-hour
Source: Saxo Bank