May 27, 2020
Global Percent change in currency value against US dollar-NY close to NY open (6:00 am EDT)
Focus on Canada: Equity, Commodity, and FX markets are behaving as though COVID-19 has been eradicated. An increasing number of jurisdictions around the world have eased, or dispensed with, lockdown restrictions.
AUDUSD rallied 12.13%, and NZDUSD gained 6.03% since bottoming out on March 18. USDCAD is the laggard. It has only recovered 4.03% of its losses. The technicals suggest it is only a matter of time before USDCAD fills the gap from March 9, which is at 1.3410.
However, it may not happen soon, especially if the British Columbia Supreme Court is expected to announce a ruling on “double criminality” which would determine if Huawei CFO Meng Wanzhou, can go free. China’s Foreign Ministry spokesman Zhao Lijian accused Canada and the US of abusing their bilateral extradition treaty.”
If the ruling goes against Ms Wanzhou, China may take a page out of Trump’s playbook, and slap tariffs or outright bans on imports of Canadian goods. That is how they reacted to Australia when that government called for COVID-19 inquiry. If so, USDCAD would retest resistance in the 1.4050 area.
Global tensions are simmering, and China is in the center of all of them. China is threatening a “harsh” response to HK protestors. China and India are moving troops near a disputed border.
China’s slapped tariffs on some Australian exports. China is demanding the US withdraw sanctions against 24 companies, imposed due to security concerns and human rights issues. It would not take much escalation to spark a stampede into safe-haven currencies.
USDCAD Technicals: The technicals are bearish while trading below 1.4050, a level guarded by resistance at 1.3850. Yesterday’s break below 1.3805, targets 1.3605 and then 1.3355. Only a move above 1.4050 would negate the downward pressure. For today, USDCAD support is at 1.3730 and 1.3680. Resistance is at 1.3810, and 1.3850. Today’s Range 1.3730-1.3830
Chart: USDCAD daily
Source: Saxo Bank
FX Recap and outlook: The US dollar opened in NY on a mixed note compared to Tuesday’s closing level. Asia equity index closes with gains while European bourses are higher led by a 1.69% rise in the DAX. S&P futures are upon 1.1% suggesting a strong open on Wall Street. Gold prices continue to decline on the improved global economic growth outlook while oil prices are softer on reports Russia may increase production.
EURUSD surged after the EU proposed a €825 billion recovery fund. EURUSD rose from 1.0935-1.1030 following the news.
GBPUSD gains lagged those of the single currency, in part because of the looming June 30 deadline for an extension to EU/UK Brexit talks beyond December 31, 2020.
AUDUSD and NZDUSD rallied on the back of improved risk sentiment as global economies reopen.
There is not any economic data of note today.