USD / CAD – Canadian Dollar Undecided


– Large USDCAD option expiries and Retail Sales ahead.

– Eurozone PMI’s weaker than expected.

– US dollar consolidating recent gains in subdued overnight session.

USDCAD: open 1.3691, overnight range 1.3674-1.3699, close 1.3700, WTI $81.31, Gold, $2363.81

The Canadian dollar see-sawed in a narrow range overnight. Traders were distracted by Eurozone and UK PMI reports and caution ahead of massive FX option expiries today.

Canadian dollar trading may get very messy heading into the 10:00 AM EDT option expiry window. There are reports that $3.2 billion of USDCAD strikes in the 1.3645-1.3680 area are maturing, along with another $2.1 billion of expiring USDCAD strikes in the 1.3700-20 zone.

Traders will be studying the April Retail Sales data. Canada retail sales are expected to have risen 0.7% m/m compared to the 0.6% drop in March. A stronger than expected report would renew speculation of another 25 bp rate cut on July 24.

Asian equity indexes traded quietly. Japan’s Nikkei 225 index closed flat while Australia’s ASX 200 posted a 0.34% gain. European bourses are underwater led by a 0.54% drop in the French CAC 40 index. S&P 500 futures are down a modest 0.15%. The US 10-year Treasury yield is a tad lower at 4.226% compared to yesterday’s closing level of 4.259%.

EURUSD traded negatively in a 1.0671-1.0721 range due to weak German and Eurozone PMI data. HCOB Chief Economist Cyrus de la Rubia asked, “Is the recovery in the manufacturing sector ending before it began?” HCOB Flash Eurozone Services PMI Business Activity Index at 52.6 (May: 53.2), a 3-month low. Manufacturing PMI 45.6 (May: 47.3), a 6-month low. EURUSD is bearish below 1.0740.

GBPUSD traded negatively in a 1.2633-1.2675 range on the heels of a dovish Bank of England monetary policy meeting. The BoE left rates on hold but issued a dovish statement that hinted at rate cuts as soon as August. The prospect of falling UK rates while US rates remain unchanged added to the selling pressure. UK Manufacturing PMI ticked up to 51.4 from 51.2 but that was offset by a dip in Services PMI which fell to 51.2 from 51.9 in June. Traders ignored improved consumer confidence and retail sales reports. The GBPUSD technicals are bearish below 1.2690.

USDJPY is trading in a 158.67-159.12 range. The low was seen in the rising inflation and lower-than-expected PMI data. May CPI, ex fresh food, rose 2.5% in May (previous 2.2%) increasing pressure on the BoJ to raise interest rates. Meanwhile, Manufacturing PMI fell to 50.1 from 50.4.

AUDUSD bounced then faded in a 0.6645-0.6670 range with gains limited after Manufacturing PMI was 47.5 in June, missing the forecast of 50.6 and weaker than the 49.7 in May. Economists suggest the results are due to softening market conditions as high interest rates take a toll.



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