USDCAD open (6:00 am EST) 1.3255-59 Overnight Range 1.3214-1.3259
The US dollar is the “Flavour of the Month,” and traders continued to have a “yen” for it overnight. The FOMC minutes, released yesterday, did not offer any incentive to change the positive US dollar sentiment.
They continued suggesting that US rates would remain unchanged, while officials “closely watched for disruptions from the coronavirus outbreak. Minneapolis Federal Reserve Bank President Neel Kashkari echoed the FOMC sentiment in a speech yesterday. He expressed “comfort” with the current level of US rates and expects they will stay put for “a while. He predicted the next Fed move will be a rate cut.
The Peoples Bank of China (PBoC) cut the one-year Loan Prime Rate (LPR) to 4.05% from 4.15% and trimmed the 5-year LPR to 4.75% from 4.80%. The action was expected. Nevertheless, USDCNY and the Shanghai Shenzhen CS! 300 index rallied.
The US dollar opened in NY with gains all around.
Chart: 24 hour, Currency gain/loss (%) against the US dollar from New York open to New York open (6:00 EST)
Source: Saxo Bank/IFXA
FX Recap and outlook: Today’s US Initial Jobless Claims (actual 210,000 vs forecast 210,00) and Philadelphia Fed Manufacturing reports barely caused a ripple in FX markets. The Manufacturing Survey was 36.7 compared to 17 previously. At any rate, the reports support the Fed’s “steady as she goes” policy
Yesterday release of the FOMC minutes served to remind traders about the vast difference in economic performance between the Eurozone and the USA, which encouraged, even more buying of US dollars.
USDJPY led the charge, rising from 110.32 at Wednesday’s NY open to 112.11 this morning for a gain of 1.62%. Some analysts suggest the rally is an extension of the monthly uptrend from July 2019 and is a result of Japanese investors shifting out of Eurozone assets and into US assets. A break above 112.30 suggests further gains to 115.40. However, the latest rally looks to be overdone, and prices could quickly retreat to 110.80.
EURUSD dropped from 108.13 in Asia to 107.79 when Europe opened on the back of broad US dollar strength. Analysts suggest that the Euro is suffering from the same woes as the Japanese yen. Investors are chasing yield, and currency speculators looking for “positive carry” are selling Mixed to slightly positive German PPI, and consumer confidence data, gave EURUSD a short pop. The intraday technicals are bearish looking for a break below 1.0770 to target 1.0680.
GBPUSD is getting any support from recent economic reports. Yesterday, UK inflation rose higher than expected, and today, Retail Sales rose higher than forecast. Instead, prices were weighed down by the broad US dollar demand against the majors, uncertainty around the upcoming EU/UK trade talks, and bearish GBPUSD technicals.
The intraday technicals are bearish below 1.2930, looking for a break of 1.2860 to extend losses to 1.2800.
AUDUSD suffered from a somewhat mixed employment report. A 13,500 rise in employment in January was offset by an increase in the unemployment rate to 5.3% from 5.1%. US dollar demand and China coronavirus concerns continued to weigh on prices. NXDUSD suffered the same fate.
China’s muddying of the coronavirus count isn’t helping. China reported a sharply lower number of new confirmed cases, but that was because of another change to diagnostic procedures, rather than evidence that COVID-19 pandemic is under control.
USDCAD looks to be the best of a bad lot and continues to outperform against its commodity currency bloc cousins. The 8.3% rise in WTI oil prices in just ten days has weighed on prices as has EURCAD selling. Traders do not appear to be concerned about a negative economic impact from the on-going railway blockades, and CN rail layoffs as a result of the unrest.
USDCAD Technical Outlook
USDCAD tested support in the 1.3215 area overnight and it held. The subsequent bounce took prices the downtrend line from February 10, at 1.3260, which is under pressure. A decisive topside break targets 1.3290 and then 1.3350. If it holds, expect more 1.3210-60 consolidation. For today, USDCAD support is at 1.3220 and 1.3190. Resistance is at 1.3290 and 1.3320. Today’s Range 1.3220-90
Chart: USDCAD 1 hour
Source: Saxo Bank