September 2, 2020
USDCAD Open (6:00 am) 1.3058-62, Overnight Range 1.3055-1.3082
- ADP Rises 428,000-Forecast was for gain of 950,000
- European stocks climb, S&P Futures pointing to another record-break day
- US consolidates yesterday’s gains, CAD, NZD outperform
Source: Saxo Bank/IFXA Ltd
FX Recap and outlook Weaker than expected ADP jobs data sparked a mild retreat in the US dollar but the greenback is well-above yesterdays lows. The data is often used as an indicator of the nonfarm payrolls report, even though it has a poor predictive record.
Yesterday, better than expected US ISM Manufacturing PMI data and weaker than expected Eurozone inflation data combined to boost US dollar sentiment. The greenback rallied across the board as analysts re-evaluated their expectations for the Eurozone economy to outperform the US. The opinion did not change overnight.
Asia and European equities followed Wall Street higher. Oil and gold prices slipped on the back of US dollar strength.
EURUSD is near the bottom of its 1.1853-1.1928 range overnight. Traders were unhappy with the 0.9% drop in German Retail Sales data in July and combined with yesterday’s 0.2% drop in August CPI y/y, raised concerns that the ECB will follow the Fed with a “low rates for longer” policy statement. The central bank’s Chief Economist Philip Lane my have been pushing back against the recent EURUSD strength last night when he said that although they do not target the exchange rate, the EURUSD rate is important.
GBPUSD got close to significant resistance in the 1.3500 area and then retreated quickly. GBPUSD dropped from 1.3401 to 1.3327 then scratched out gains to 1.3360 in early NY trading. The sell-off was precipitated by broad US dollar gains vs the majors with a bout of profit-taking thrown in. Traders have forgotten risks about the BoE adopting negative interest rates, and are ignoring the lack of progress in EU/UK trade talks. The intraday GBPUSD technicals are bearish but need to break below 1.3330 to extend losses.
USDJPY rallied on the back of renewed US dollar strength. The gains are merely a correction while prices are below 106.70
AUDUSD retreated off its 0.7410 peak on Monday and hit 0.7338 overnight. Australia Q2 GDP fell 7.0% q/q in July sparking headlines of a “technical recession.” The news shouldn’t have surprised anyone aware there was a global pandemic at the time.
NZDUSD surged after RBNZ Governor Adrian Orr said he wasn’t concerned about the exchange rate.
Traders seemed to ignore the rest of his speech was a tad dovish.
USDCAD had a sniff below 1.3000 yesterday and didn’t like the smell. Prices climbed to 1.3083 then traded in a narrow 1.3055-1.3082 range overnight. The currency pair will continue to track US dollar sentiment.
US ADP employment and Factory orders data are due.
USDCAD Technicals: The intraday technicals flipped to bullish with the break above 1.3050 yesterday. However, the move is merely a correction inside the downtrend from July 14 if prices stay below 1.3150. Above 1.3150 would argue a short term bottom is in place at 1.2992 and shift the focus to 1.3500. For today, USDCAD support is at 1.3030 and 1.2990. Resistance is at 1.3090and 1.3130. Today’s Range 1.3030-1.3110
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank