USD/CAD Down, February Support Eyed. Asia Stock Gains May Dent JPY
Asia Open – Canadian Dollar, Crude Oil Prices, Risk Trends, Stocks, US Dollar. Japanese Yen
- Canadian Dollar rose throughout the day, first following crude oil prices and then stocks
- Bill Morneau announced steel protection, USD/CAD approached February support line
- The rise on Wall Street may permeate into Asia/Pacific shares, hindering JPY prices next
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The Canadian Dollar was easily the best performing major on Tuesday, even surpassing the US Dollar. Its appreciation appeared to be linked to a chain of events rather than one singular update. During the European trading session, CAD rose with crude oil prices which rejoiced in the aftermath of an OPEC report showing an unexpected contraction in Saudi output.
In the US trading session, the greenback rallied as a reduction in Turkey contagion fears improved marketwide mood. After rising over 20% in recent days, USD/TRY headed lower as much as 7% on Tuesday. Stocks rejoiced both in the US and Canada as the S&P 500 and TSX Composite rose about 0.64% and 0.49% respectively.
A strong US Dollar made crude oil relatively cheaper, the commodity relinquished earlier gains. However, CAD still stood strong. This may have been due to comments from Canada’s Finance Minister Bill Morneauseeking topotentially protect their metal industry. Amidst a risk of a surge in steel imports after the US imposed metal tariffs on them, he said that they will apply safeguards if industry harm is shown.
Additional Comments from Bill Morneau:
- There will be a 15-day consultation on steel safeguards
- 7 steel products are under review
- Other nations may divert steel to Canada
- We have already seen an increase in steel imports
- Tariffs have complicated impacts
- Canada will also seek to prevent new US tariffs
The improvement in sentiment did note bode well for the anti-risk Japanese Yen, and Asia/Pacific benchmark stocks could echo gains from Wall Street. This could further hinder JPY while relatively-higher yielding currencies like the Australian and New Zealand Dollars could rise. The former could even climb further if local wage growth beats expectations, as Australian data has been tending to do so rather lately.
USD/CAD Technical Analysis – February Trend Line In Sight
After failing to push above a near-term descending trend line, USD/CAD appears to be heading lower towards the longer-term rising trend line from February. However, clearing it will also involve getting under a range of support (1.2982 – 1.2962) which consists of the July/August lows. A descent through it exposes the next horizontal channel (1.2766 – 1.2729) which is made up of the May lows.
Chart created in Tradingview
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.