January 2, 2020

USDCAD open 1.2990-94 (6:00 am EST)     -Range: Dec 20 close to Jan 2 open 1.2954-1.3172

Happy New Year and welcome back. The new decade started, and the US dollar was in demand, mostly due to the completion of month-end and year-end portfolio rebalancing dollar selling. News that the US/China Phase 1 trade agreement would be signed in Washington on January 15 and steady to higher US Treasury yields contributed to the greenback strength.

 However, the US dollar is down across the G-10 major currency spectrum since the close on December 20. GBP just nosed out NZD for the title of “best-performing currency” during that period.

FX Market Snapshot

Change in currency value against the US dollar from NY close to NY  open

Source:  Saxo Bank/IFXA

EURUSD is trading in New York at its overnight low as the impact of year-end portfolio rebalancing fades, and traders focus on Eurozone economic weakness compared to US economic growth. EURUSD losses were exacerbated by soft December German and Eurozone Markit Manufacturing data and steady to firm 10-year US Treasury yields, which are trading at 1.92% in New York. The intraday EURUSD technicals are bearish while prices are below 1.1205 and looking for a test of support at 1.1160.

GBPUSD rallied from 1.3110 to 1.3275 on December 31 due to year-end portfolio rebalancing flows, and that move is being unwound this morning. GBPUSD sellers got an assist from a slightly weaker-than-expected December Markit Manufacturing PMI (Actual 47.5 compared to forecast of 47.6) and broad US dollar strength. The intraday technicals are bearish below 1.3250 and looking for a test of 1.3100 support.

USDJPY dropped heavily, falling from 109.65 on December 26 to 108.48 on New Year’s Eve.  Once again, portfolio rebalancing was a major factor in the move. Today was a holiday in Japan. Nevertheless, firm US treasury yields lifted prices from an overnight low of 108.55 to 108.84. The USDJPY technicals are bearish while prices are below 109.10, but robust support in the 10830-40 zone, contains the downside.

AUDUSD rallied steadily since December 18, climbing to 0.7030 from 0.6840, due to news of a US/China Phase 1 Trade deal, which will be signed at the White House on January 15, and because of year-end flows. Overnight, prices retreated to uptrend line support at 0.6980. A decisive break of this level opens the door to further losses to 0.6883.

Oil prices rallied throughout December and are consolidating those gains. WTI bounced erratically in a $60.60-$62.25/barrel range since December 30 and is trading at $61.13 in New York today. Prices are supported by the latest Opec/Russia crude production cuts, increased Middle East tensions, and optimism for improved global growth due to the US/China Phase 1 trade agreement.

Today’s US and Canadian economic data is second tier and unlikely to spark much interest from FX traders.

USDCAD plunged from 1.3172 on December 20 to 1.2954 on December 31 due to the US/China trade developments, firm oil prices, and US dollar selling due to portfolio rebalancing requirements. Overnight, prices ticked higher, rising to 1.3003 from 1.2968, due to a bit of profit-taking. The technicals are bearish while prices are below 1.3300. Prices are flirting with long-term uptrend support in the 1.2940-80 area, stemming from the uptrend line from September 2017.For today, support is at 1.2960 and 1.2940.  Resistance is at 1.3020 and 1.3050. Today’s Range 1.2970-1.3050

Chart: USDCAD daily

Source: Saxo Bank