April 1, 2020

USDCAD open (6:00 am EST) 1.4248-52    Overnight Range 1.4068-1.4249

  • Poor start for stocks in Q2- Nikkei 225 plunge leads major Asia and European indexes lower
  • Trump tweeting calls for a new $2 trillion infrastructure spending plan
  • White Housed warns of up to 240,000 CVOID-19 deaths in US
  • Oil prices pressure by news Saudi Aramco pumped over 12 million barrels per day in March
  • US dollar in demand to start Q2, led by 1.36% jump in USDCAD

US dollar in demand to start Q2, led by 1.36% jump in USDCAD

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: FX markets started April the way they ended March; volatile, erratic, and with wide trading ranges.  COVID-19 lockdowns and stock market meltdowns have done a number on liquidity, which led to exaggerated FX trading ranges, exacerbated by program trading.

President Trump appears to have trashed his “Easter economic recovery” theme and warned, “This could be a hell of a bad two weeks.”  That’s also a good prediction for global asset markets.

There was a slew of economic data reports released in Asia, Europe, and the UK.  No one really cared.  The data was stale, obvious or both.

EURUSD accelerated higher after the 11:00 am fix passed, but the rally stalled at1.1038 when Asia opened.

Prices bounced in a 1.006-1.1035 range until European traders walked in, They wanted US dollars and didn’t care about strong German Retail Sales numbers in February, or weak Eurozone PPI data.

EURUSD dropped to 1.0915 before inching back to 1.0940 in NY trading.

GBPUSD whip-sawed in a 1.2332-1.2437 band.  UK Manufacturing PMI of 47.8 served to underscore the economic damage from COVID-19 lock-downs and business closures.

USDJPY consolidated yesterday’s losses in a 107.27-107.93 range.  The March Tankan report showed business sentiment for the Large Manufacturing Index,  plunged to the lowest reading (-8) in seven years, which shouldn’t have surprised anyone.

AUDUSD and NZDUSD traded lower on the back of broad US dollar demand. The RBA minutes offered a ray of hope, with officials expecting a recovery after the pandemic is contained.

Oil prices are off recent lows, but gains are capped by concerns about rising Saudi crude production, sharply falling global demand, and a shortage of storage. Saud Aramco said it pumped over 12.0 million barrels/day in March.  Production is expected to increase in April.  Opec failed to agree to hold an emergency meeting.

USDCAD continues to ride a roller coaster.  Prices climbed from 1.4173 yesterday to 1.4340 at the 11:00 am fix, then plunged to 1.4014, just ahead of the NY close. USDCAD climbed steadily overnight and touched 1.4260 just as today’s session started.  USDCAD is tracking broad US dollar sentiment but gets added volatility from oil price action.  That pattern will not change anytime soon.

The US ISM Manufacturing PMI is expected at 45, compared to 50.1 in February.  The news, while expected, may add to global equity woes, and increase demand for US dollars. USDCAD will rise as a result.

USDCAD technical outlook

The USDCAD March uptrend is intact above 1.4040, looking for a break above 1.4350 to extend gains to 1.4560. The longer term view continues to suggest that Longer term the break above 1.4690 level would extend gains to 1.5150.   For today, USDCAD support is at 1.4170 and 1.4040.  Resistance is at 1.4350 and 1.4430. 

Chart: USDCAD 4 hour

Source: Saxo Bank