NY Open: Dollar drifts in sluggish trading

The US dollar is modestly weaker in a sluggish New York trading environment. Traders appear reluctant to extend US dollar losses much further due to the magnitude of the correction this week because of the reality of a robust US economy and a hawkish Fed. The greenback inched higher against EUR, GBP, and CHF, is flat against AUD, NZD, and JPY, and posted a tiny gain against CAD.

Traders are content to bide their time until the release of the August 1 Federal Open Market Committee meeting minutes at 18:00 GMT. The minutes are not expected to offer any surprises leaving the Friday/Saturday Jackson Hole Symposium as the next market flashpoint.

President Trump’s political and possible legal woes are an entertaining distraction in a sluggish trading environment but are unlikely to impact FX markets. The Washington Post reported that the US Constitution doesn’t allow for the criminal indictment of a sitting president;
Wall Street is ambivalent. The DJIA opened in the red put is currently trading in positive territory. The S&P 500 is flat and the NASDAQ is slightly lower.

USDCAD bounced erratically after the June Retail Sales data were released. The -0.2% decline was exactly as forecast. Statistics Canada noted that Q2 Retail Sales rose 1.0% compared to 0.5% in Q1. The more significant risk to the Canadian dollar is the Nafta renegotiation. Politico reported that a US/Mexico “handshake” trade deal might be announced as soon as tomorrow. Canada was excluded from the last series of meetings, and if the US/Mexico have a deal, Canada may be in a “take it or leave it” position.

USDCAD is in a minor downtrend while prices are below 1.3040 looking for a break of support in the 1.2990-1.3005 zone to extend losses to 1.3060. A decisive break below 1.2960 targets 1.2750. A move above 1.3040 suggests further 1.300-1.3200 consolidation.

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USDCAD (daily, source: Saxo Bank)

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