March 12, 2020

USDCAD open (6:00 am EST) 1.3676-80    Overnight Range 1.3655-1.3719

  • Global equities tank after US bans travel from Europe
  • Wall Street trading will be messy.  Stock futures are  flirting with “limit down”
  • Oil prices plunge.  WTI falls 7.3% on travel ban news
  • US 10-year Treasury yield drops from 0.87% to 0.686% (as of 6:15 am EST)
  • WHO pandemic call spooks investors
  • JPY and USD soar, CAD unchanged at open, EUR awaits ECB

 Chart: Currency gain/loss (%) against the US dollar from NY close to NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:  Wash your hands, avoid large gatherings, and if you are from Europe, do not come to the United States.  President Trump blamed the European Union failure to take precautions with travellers from China for the spread of Covid-19 in the Euro-area.  He wasn’t going to make the same mistake.

He said” To keep new cases from entering our shores, we will be suspending all travel from Europe to the United States for the next 30 days,” as of Friday, midnight.  He also spoke of economic support initiatives such as providing capital and liquidity to small business, deferring tax payments without interest or penalties for certain individuals and small businesses, while asking Congress to provide payroll tax relief.

Meanwhile, China said the worst was over for its COVID-19 outbreak. The Ministry of Commerce said factory use is expanding and exports will accelerate.

EURUSD sank ahead of today’s European Central Bank monetary policy meeting and a further tightening of Italy’s lockdown.  ECB President Christine Lagarde hinted at new stimulus measures due to the coronavirus.  Lagarde’s comments and the European travel ban to the US drove EURUSD from 1.1333 to 1.1233 in New York.

GBPUSD dropped alongside EURUSD, due to broad US dollar demand. Yesterday’s UK budget promised a £30.0 billion package to boost the economy, with £12.0 billion for coronavirus measures. Some analysts forecast that these measures will allow the UK economy to outperform that of the Eurozone.

Nevertheless, GBPUSD traded down from a peak of 1.2848 to 1.2743 and is trading just above the low in New York.

USDJPY plunged from 104.80 to 103.09 when Trump announced the travel ban.  Prices recovered to 103.75 in New York, but on-going risk aversion sentiment and low US Treasury yields capped gains.

AUDUSD and NZDUSD sank on the back of negative risk sentiment with Aussie selling exacerbated by weak Consumer confidence data.

Oil prices were hammered by news of the travel ban.

Prices were already under pressure from rising US crude inventories.  The Energy Information Administration said weekly crude stocks rose 7.6 million barrels in the prior week.  Opec and Russia have not resolved their production quota dispute, and the Saudi hunt for market share continues to weigh on oil prices.

USDCAD is in demand. Weak oil prices and broad US dollar demand are underpinning prices. The Federal government’s response to the COVID-19 outbreak was feeble compared to measures adopted by other nations.

The outbreak is expected to drive Q1 growth into negative territory.

There are not any Canadian economic reports today, and the US data will be overshadowed by Wall Street price action.

USDCAD Technical Outlook

The USDCAD technicals are bullish while trading above 1.3740 with the break above the 2017 peak of 1.3790 targeting 1.4015.   For today, USDCAD support is at 1.3740 and 1.3710.  Resistance is at 1.3850and 1.3910. Today’s range 1.3750-1.3850

Chart: USDCAD daily

Source: Saxo Bank