February 7, 2020
USDCAD open (6:00 am EST) 1.3308-12 Overnight Range 1.3286-1.3311
USD USDCAD was on the brink of accelerating towards 1.3400. Resistance in the 1.3000-05 area had crumbled and prices inched above the overnight high, reaching 1.3316 prior to the release of US nonfarm payrolls and Canadian Labour Force Survey data. Canada added 34,500 jobs in January, easily beating the forecast of a 15,000 gain. NFP rose 225,000 (forecast 205,00, the unemployment rate ticke higher to 3.6%, and average hourly earnings rose 0.2% compared to 0.1% in December.
USDCAD touched 1.3319 and then 1.3286 immediately after the news but prices quickly gravitated to 1.3308. The Canadian results are tarnished as 21,300 of the job gains are public service
There is about $1.1 billion of 1.3290-1.3300 option strikes expiring at 10:am EST, which may impact trading near that time.
Chart: Currency gain/loss (%) against the US dollar from New York close to New York open
Source: IFXA/Saxo Bank
Overnight,increased expectations for a robust nonfarm (NFP) payrolls report, supported by Wednesday’s forecast-beating ADP employment data fueled US dollar demand. Usually, the ADP report is a notoriously poor indicator of NFP result, but this time was different.
EURUSD traded sideways in Asia and dropped from 1.0984 to 1.0891 in early Toronto trading following worse-than-expected German Industrial production, which fell 3.5% m/m, in December. EURUSD continues to be under pressure due to US economic outperformance compared to the Eurozone, and dovish European Central Bank (ECB) monetary policy. The drop below support at 1.1000, exacerbated the bearish technical outlook and traders are looking for further losses to 1.0850.
GBPUSD was relatively stable, trading just above this week’s low of 1.2920. Prices are suffering from the broad US dollar weakness and concerns about acrimonious trade negotiations with the EU and USA. President Trump is reportedly irate at Britain’s decision to give Huawei a role in its 5G mobile networks.
Oil prices are hovering above the $50.00/barrel level. The 15% drop in China crude refining since the coronavirus outbreak and Russia’s reluctance to agree to Opec’s proposed 600,00 barrel per day production cuts continues to pressure the downside.
USDCAD is supported by the drop in oil prices, the dodgy Canadian employment data, broad US dollar demand, and the Bank of Canada’s dovish monetary policy stance.
Canadian Ivey PMI data is released later today, and if it is higher than the 53.3 forecast, it may act as a drag to USDCAD gains.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish. above 1.3280, looking for a test and break of resistance at 1.3340. to extend gains to 1.3440. A break below 1.3280 targets 1.3230 and then 1.3170. For today, USDCAD support is at 1.3290 and1.3240. Resistance is at 1.3340 and 1.3380. Expected range for today 1.3280-1.3380
Chart: USDCAD daily
Source: Saxo Bank