- Biden plans releasing 1.0 million b/day from SPR
- Russia peace talks are a sham
- US dollar ending month on mixed note
FX change at a Glance March 2022
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2527-31, overnight range-1.2479-1.2532, close 1.2482
USDCAD dropped to the 1.2430-40 area yesterday around the 10:00 am windows for option expiries. The support level held, and prices rebounded to on the approach to the World Markets Reuters 11:00 am fix, fueled by demand for EURCAD and GBPCAD. The rally didn’t get legs and USDCAD spent the rest of the session in a 1.2465-1.2485 range.
USDCAD downside is also impeded by the drop in WTI oil from $107.75/barrel to $100.60/b in Asia overnight. That happened when President Biden spoke of plans to release 1.0 million barrels/day from the Strategic Petroleum Reserves for at least six months.
The Biden plan will is a step in the right direction, but it only represents 5% of the US daily energy consumption. Canada’s plan is to raise gasoline taxes again, perhaps hoping that Canadian’s will drive less.
USDCAD is poised to end March in positive territory, although it sharply underperform compared to the Australian and New Zealand dollars. The Japanese yen was the worst performing G-10 currency, losing 6.16% due to rising US Treasury yields and dovish Bank of Japan monetary policy.
USDCAD remains vulnerable to global risk sentiment and broad US dollar moves.
Canada January GDP rose 0.2% m/m in January, as expected. Nevertheless, it is an impressive report as it reflects the resilience of the economy in the face of the Omicron outbreak.
USDCAD technical outlook
The USDCAD technicals are bearish following the break below support at 1.2670 on March 17. The subsequent downtrend remains intact while prices are below 1.2530. The downtrend from June 2020 is intact below 1.2680. A break above 1.2530 targets 1.2580 and then 1.2620. A move below 1.2430 targets 1.2280.
For today, USDCAD support is at 1.2470 and 1.2430. Resistance is at 1.2530 and 1.2570. Today’s Range 1.2450-1.2550
Chart: USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
Month-end and quarter-end rebalancing flows and the Russian invasion of Ukraine are made for a choppy FX session.
The sharp gain in the S&P 500 in March implies portfolio managers need to sell US dollars, while disappointment from a lack of progress in Russia/Ukraine peace talks underpins the greenback.
Against that backdrop, Fed officials continue to chirp about the need for higher interest rates. Yesterday, Kansas City Fed President Ester George said, “Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate.”
Global equity markets are under pressure. The major Asia equity indexes closed with losses, and European bourses are in negative territory. S&P 500 and DJIA futures are flat.
WTI dropped 6.23% from the close, while gold is down 0.51%. The 10-year US Treasury yield continued to slide and is sitting at 2.339% in NY.
The US dollar got a bit of a bump following this mornings data. Personal spending rose 0.2% compared to the 0.6% expected but the January numbers were revised sharply higher (2.7 from 2.1%). Inflation rose 6.4% y/y, as measured by the PCE price index
Jobless claims rose 14,000 but the four-week average still managed to slide by 3,500.
EURUSD dropped to 1.1069 following the US data after trading in a 1.1103-1.1184 range overnight. The single currency is suffering from fading hopes for a quick resolution to the Ukraine crisis. The Euro area February unemployment rate dipped to 6.8% m/m compared to 6.9% m/m in January. The EURUSD technicals are bearish below 1.1180.
GBPUSD was more resilient that EURUSD after the US data. Prices only extended the overnight low to 1.3108 from 1.3114 and are attempting to retest the session peak of 1.3147. Prices are underpinned by better than expected UK data. (Q4 GDP rose 6.6% y/y, Housing Prices climbed 14.3% y/y and Business investment rose 1.0% y/y). The intraday GBPUSD are bullish above 1.3050.
USDJPY traded in a 121.35-122.44 range overnight with prices sitting at 121.63 after the data Prices were pressured by a mix of Japanese fiscal year-end demand for yen, and the slide in US Treasury yields.
AUDUSD and NZDUSD traded lower due to the drop in commodity prices but have recouped some of the losses in NY.
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
Today’s Bank of China Fix 6.3482, previous 6.3566
Shanghai Shenzhen CSI 300 fell 0.74% to 4,222.60
NBS March Manufacturing PMI 49.5 (forecast 49.9, February 50.2)
NBS non-Manufacturing PMI 48.4 (forecast 53.2, February 51.6)
Chinese government pledges to prioritize stable growth, kept 5.5% GDP Growth target.
Chart: China 1 month
Source: Saxo Bank