USDCAD open: 1.3529, overnight range 1.3546-1.3607, close 1.3568

The Canadian dollar is the best-performing G-10 major currency overnight, thanks once again to soaring oil prices.

WTI soared from Friday’s low of 85.94 to 116.63/barrel in Asia overnight, before sliding to 99.32 by the NY open today.

Traders fear an oil shortage after Iraq’s oil output dropped by around 60%, and both Kuwait and UAE said they were cutting production because the Strait of Hormuz is effectively closed, and they are running out of storage. Optimistic analysts are hoping that the closure will last just a week or two. Pessimists at Deutsche Bank are predicting 200/b Brent crude with a prolonged closure of the Strait.

Trump is unphased by the price spike, tweeting, “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!” President DJT

Some fools that are thinking differently include equity, bond, and commodity traders. Global stock markets are drowning in red ink. The fear of higher inflation raised fears of central bank rate hikes, and the 10-year Treasury yield jumped from 4.109% on Friday to 4.214% overnight.

Chart: WTI 5-day

Oil prices and developments in Iran will dictate FX direction as there are no top tier US or Canadian economic reports on tap today.

USDCAD Technical Outlook

The intraday USDCAD technicals (4-hour chart) are bearish while trading below 1.3620, which corresponds to the middle Bollinger band and 4-hour moving-average cluster. Momentum indicators are oversold but still pointing lower, suggesting downside pressure remains intact. A break below 1.3510 targets 1.3470 while a move above 1.3620 would ease the immediate pressure and extend gains toward 1.3660.

The medium-term technicals are bearish with a downtrend line guiding prices lower while they are below the 1.3770-80 area and are looking for further losses to test 1.3400. A break above 1.3780 negates the down trend and targets 1.4000.

For today, USDCAD support is at 1.3510 and 1.3470. Resistance is at 1.3570 and 1.3620.

Today’s Range: 1.3480-1.3580

FX Heat Map (6:00 am) one week

FX  open high low 6:00 am

Overnight Round-up

The US dollar index (DXY) rallied to 99.62 when WTI climbed above 116.00/b but has since retreated on reports that the G-7 will discuss releasing oil from strategic reserves. Gold (XAUUSD) was a big loser, falling from 5193.21 to 5015.22 due to fears of an inflation spike from higher crude prices, forcing central banks to hike rates.

The Donald J. Trump War on Iraq overshadowed Friday’s surprisingly weak nonfarm payrolls. The unexpected loss of 92,000 jobs and the rise in the unemployment rate to 4.4% served to muddy the Fed’s interest rate debate. The idea of a rate cut is no longer as far-fetched as it was before the data. Fed Governor Miran said he was hesitant to read too much into one employment report. Boston Fed President Susan Collins said she still expects Fed policy to remain unchanged “for some time.

Taking Stock

Asian equity markets were hammered. Japan’s Topix plunged 3.80%, Australia’s ASX 200 lost 2.85% and the Hong Kong Hang Seng lost 1.35%.

As of 5:30 am PT, European bourses posting steep losses but better than they were earlier.  The German DAX is down 1.33%, the French CAC 40 has lost 1.79%, the UK FTSE 100 has dropped 1.06% and S&P 500 futures are down 0.82%. The 10-year Treasury yield is 4.173% and gold (XAUUSD) is 5,108.38.

EURUSD

EURUSD gapped lower at the Asia open and traded in a 1.1507–1.1573 range. The talk about drawing down strategic reserves eased immediate fears of an inflationary spike from higher oil prices and EURUSD rallied back to 1.1565 in NY. News that Germany’s industrial production fell 0.5% m/m in January and that Eurozone Investor Confidence was -3.1 (previous 4.2) didn’t help.

GBPUSD

GBPUSD traded poorly in a 1.3283–1.3413 range. It gapped lower at the Asia open and is trading at 1.3355 in NY. Prices were also spanked after Trump took a shot at UK PM Keir Starmer, mocking him for wanting to “join a war after we’ve already won.” Oh, oh. It must be time for King Charles to host King Donald again.

USDJPY

USDJPY jumped from Friday’s NY close of 157.56 to 158.90 in early Asia, then drifted in a 158.30–158.70 range into the NY session. The surge in oil prices hits Japan hard. Japan’s trade minister is asking Trump to exempt it from the planned tariff hike.

AUDUSD

AUDUSD traded in a 0.6956–0.7033 range. Prices bounced from the market opening lows and are flirting with the top of the band. Higher China inflation numbers and the risk for a RBA rate hike provided some support.

USDMXN

USDMXN traded in a 17.8020–18.0245 range due to broad US dollar strength and the fallout from Trump’s war on Iran.

China

USDCNY Fix: 6.9158   (Prev. 6.9025)

Shanghai Shenzhen CSI 300 fell 0.97% to 4,615.46

China’s inflation rose to 1.3% y/y in February, from 0.2%y/y in January and 1.0% m/m from 0.2%.  PPI improved to -0.9% from -1.4% y/y

Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics Tradingview