USDCAD range bound with broad USD bid offset by CAD cross sales. Positive NAFTA headlines helped sellers yesterday. FOMC meeting tomorrow.
Summary
  • USDCAD: Its been a relatively range-bound overnight session for USDCAD as broad USD strength since the release of UK CPI has been offset by EURCAD and GBPCAD selling. Yesterdays closing pattern wasnt great technically because the market failed at overhead resistance earlier in the day (1.3125) and the closed right at the 1.3050-60 support area with downward momentum. There are no key data points on deck for todays North American trading session and so traders will likely watch the broader USD theme, the CAD crosses, and the newswires for any more positive NAFTA speak (which helped USDCAD probe lower yesterday). Given the AUDs close correlation to CAD of late however, we also would pay close attention to the large AUDUSD option expiry (1.25bln) at 0.7700 today as it will likely keep AUDUSD heavy into 10am and conversely keep USDCAD bid. Canadian dollar futures traders added over 7k contracts in new positions yesterday, which we suspect is a continuation of the position accumulation theme reported in the CFTCs COT report last Friday (both longs and shorts adding). All this being said, we would not be surprised to see USDCAD range trade today ahead of Jerome Powells first FOMC meeting as Fed Chair tomorrow. Markets are expecting a 25bp rate hike from the Fed, but the key as always will be the post meeting press conference and the Fed chairmans tone on inflation expectations.

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