January 7, 2021
- It’s official- Biden is President and Dems control House and Senate
- US dollar rally is just a correction, while USDX is under 90.00
- US dollar rebounds, opens with gains against the G-10 majors
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: Nothing says “Democracy” like an unruly mob invading the inner sanctum of democracy at the behest of a petulant, losing candidate. President Trump wanted to disrupt the official certification of Joe Biden. He got his wish, but he disgraced the Republican party and empowered the Democrats. Who knew that Sid Vicious would be a 1992 Nostradamus?
Asia equities closed on a mixed note, while European bourses, except the UK FTSE 100 are modestly higher. Wall Street futures is poised to open in positive territory, but S&P 500 futures are off their best levels. Gold prices are a tad lower while WTI prices inched higher.
EURUSD traded uneventfully in Asia, then dropped in Europe with prices falling from 1.2344 to 1.2246. Ironically, the single currency was sold due to safe-haven demand for US dollars due to Trump instigating the Washington unrest. A string of Eurozone economic data didn’t matter to traders, as all eyes were on US politics. ESI economic confidence was 90.4, compared to 87.7 in November. Retail Sales dropped 6.1%, while inflation was unchanged at -0.3% y/y. The short term EURUSD technicals are bullish while prices are above 1.2230.
GBPUSD bounced between 1.3565-1.3632 range. The post-Brexit optimism and expectations for a UK economic rebound clashed with more immediate concerns about the impact of harsh COVID-19 restrictions on growth.
USDJPY rallied to 103.70 from 102.96 on the back of broad US dollar demand, and higher US 10-year Treasury yields which traded in a 1.029-1.066% range.
AUDUSD and NZDUSD dropped on the risk-aversion shift into US dollars. AUDUSD losses were limited by steady to firm iron-ore prices.
WTI oil prices received good news yesterday when the EIA reported an 8.0 million barrel decline in weekly crude stocks. They were already underpinned by this week’s news that Saudi Arabia would cut production by 1.0 million BPD in February.
USDCAD continues to trade with shifts in US dollar sentiment. The currency pair opened at the top of its 1.2666-1.2732 range, with future direction determined by EURUSD and AUDUSD direction.
Today’s US data includes weekly jobless claims (forecast 800,000) ISM Services PMI, and Trade Balance. Canada’s Trade data is also on tap.
USDCAD Technicals: The USDCAD downtrend channel from the middle of December is intact while prices are below 1.2750. Only a decisive topside break would negate the downside grind. For today, USDCAD support is at 1.2700 and 1.2660. Resistance is at 1.2750 and 1.2790. Today’s Range 1.2670-1.2750.
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank