April 1, 2021
- Global risk sentiment improves on Biden’s “once-in-a-generation” splurge
- Jobless claims higher than forecast but previous week revised lower
- Canadian dollar ends quarter as best performing G-10 currency vs US dollar
USDCAD open (6:00 am ET) 1.2578-82, Overnight Range 1.2559-1.2600, Close 1.2562
FX at a Glance
Source: IFXA Ltd/RP
The Canadian dollar finished Q1 2021 as the best performing G-10 currency against the US dollar. The Japanese yen was the worst with the Swiss franc close behind. Surging oil prices and USDCAD trading as a proxy for the greenback were catalysts for the strength.
US Weekly jobless claims were a tad higher than forecast was only a minor disappointment as the previous weeks number was revised sharply lower. The data serves to leave tomorrows non-farm payrolls forecast of 647,000, unchanged.
A couple of decades ago, if the US government spend a “billion dollars here, and a billion dollars there,” some politicians considered it would soon add up to “real money.” They were wrong. In President Joe Biden’s world, a couple of billion dollars is just a rounding error.
Last night, Mr Biden announced plans for another US stimulus plan worth about $2.3 trillion, which is on top of the $1.9 trillion CVOID Relief bill passed March 10, and the $900 Coronavirus bill on December 21.
The news underpinned global risk sentiment. Asia equity indexes closed higher led by a 1.24% gain Hong Kong’s Hang Seng index, supported by Japanese and Chinese economic data. European bourses are trading with gains, and Wall Street is poised to open in positive territory. Gold and oil prices rose while 10-year Treasury yields are 1.718%
EURUSD is at the top of its 1.1714-1.1760 range. Positive sentiment from hopes that Biden’s latest spending plan boosts global economic growth is offset by ongoing COVID-19 issues in Europe.
France is locking the country down for a month and maintaining a curfew. EURUSD did not get any support from ECB Chief Economist Philip Lane. He said the near term economic outlook is uncertain and that the latest rise in inflation is all because of the pandemic shock. Euro area PMI data was better than expected but ignored. The short-term EURUSD technicals are bearish below 1.1760.
GBPUSD was steady in Asia, then dropped to 1.3748 in early Europe before rebounding to 1.3803after better than expected UK Manufacturing PMI data (actual 58.9 vs forecast 57.9). That is the highest reading for the index since 2011. GBPUSD is trapped in a 1.3670-1.3850 range with a negative bias from the February downtrend line that comes into play at 1.3850.
USDJPY began its new fiscal year quietly, trading in a 110.58-110.82 range. The quarterly Tankan survey was upbeat, pointing to a steady post-pandemic recovery. However, the risk of higher US interest rates and bullish technicals targeting 112.00 supports the currency pair.
AUDUSD dropped to 0.7534 from 0.7599 due to disappointing economic data. February Retail Sales fell 0.8% m/m, and the trade surplus narrowed. Prices recovered to 0.7568 in early NY trading. NZDUSD is trading at the top of its 0.6947-0.6986 range in NY.
Oil prices are steady into the Opec meeting. The cartel is expected to roll over existing production cuts for a month or two.
USDCAD did not suffer from better than expected January GDP data (actual 0.7% m/m vs forecast 0.5%). Yesterday’s post data drop from 1.2595 to 1.2540 was due to chunky month-end/quarter-end USDCAD selling pressures. Firm oil prices, hopes for spillover benefits from US stimulus initiatives, and expectations for a less dovish Bank of Canada monetary policy outlook limit US dollar gains.
ISM Manufacturing PMI is expected at 61.3 compared to 60.8. The Easter long weekend means market liquidity will start evaporating rapidly just before lunchtime. A large swath of Europe and the UK, Australia and New Zealand are closed on Friday and Monday.
Canada is closed Friday while US markets are wide open both days.
USDCAD Technicals: The intraday technicals are bullish above 1.2550, looking for a break above 1.2650 to extend gains to 1.2760. The break of the year-long downtrend at 1.2610 Tuesday is bullish but the failure to sustain gains suggests more 1.2540-1.2650 consolidation is in the cards. For today, support is at 1.2550 and 1.2510. Resistance is at 1.2610 and 1.2650. Todays Range 1.2550-1.2620
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank