USDCAD: Bottom Range Feeding

The North American morning has been a little different than the past couple days in a variety of ways as equity markets are down, but rallying heading in to lunch and the USD is performing admirably after relinquishing more ground in European trade. Helping the US case is the fact that a majority of US data releases were pretty positive as Weekly Initial Jobless Claims and Markit Flash Services & Composite PMIs beat consensus expectations. Federal Reserve member Dennis Lockhart also tried talking some sense in to the market by telling us that it really didn’t matter when his institution raised interest rates in the grand scheme of things, and that he believed that many of the recent US data misses was a transitory situation due to declining oil prices and bad weather. Considering the general belief that Lockhart is resolutely on the “dove” side of the scale, those comments could be viewed as pretty hawkish.

Outside of Lockhart’s stance, since the Fed announced that they likely wouldn’t be raising interest rates at their next meeting, the USD has been taking a beating against all its rivals. The EUR/USD rallied all the way up to 1.10, the GBP/USD jumped up over 500 pips in short order to take out 1.51, the USD/JPY fell back below 120, and the USD/CAD was rejected near the top of a range it has been slogging through since late January. Interestingly though, the USD/CAD is now near the bottom of that same range. If the market views Lockhart’s words as a hint that the Fed is more aggressive than initially surmised, the USD could come back in a big way and bounce off the bottom of this range with lots of room to go to the upside.