Source: HDClipart

April 29, 2022

  • China hint of fresh stimulus rejuvenates stocks, sinks US dollar
  • Canada growth soars by 1.1% in February
  • USD ending April mildly defensively, CAD outperforms

FX change at a glance: 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2744-48, overnight range 1.2725-1.2811, previous close 1.2807

The Canadian economy is sizzling, at least it was in February. Statistics Canada said “domestic product (GDP) rose 1.1% in February, the largest monthly growth rate since March 2021, as broad-based increases across most sectors contributed to the ninth consecutive monthly expansion in economic output.

USDCAD dropped to 1.2725 from 1.2745 immediately following the news but quickly reversed the drop due to wobbly US equity market performance.

Source:  Statistics Canada

USDCAD was under pressure at yesterday’s close, continued to slide overnight and found a bottom at 1.2727 just before NY opened. A modestly better risk tone following reports China planned fresh stimulus, and yesterday’s stellar performance on Wall Street fueled the selling.

Talk of new China stimulus with a focus on infrastructure projects, reports that Germany will phase-out Russian oil purchases and the sliding greenback, boosted oil prices. WTI oil was $100.10 Thursday morning and its jumped to $106.48 in NY trading today. The oil rally contributed to USDCAD selling.

The recent mix of strong domestic data, coupled with elevated oil prices and a hawkish BoC outlook suggests USDCAD gains are limited and prices may drift lower.

USDCAD technical outlook  

The USDCAD technicals turned bearish. The failure to break above key resistance in the 1.2870-80 area followed by the drop below the April 21 uptrend line at 1.2820, suggests a test of support in the 1.2670 area is likely. The intraday technicals are bearish below 1.2770.

For today, USDCAD support is at 1.2720 and 1.2670.  Resistance is at 1.2770 and 1.2820.  Today’s Range 1.2670-1.2770

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

US consumers are making more and spending. March Personal income rose to 0.5% m/m from 4.4%, while Personal spending jumped 1.1% (forecast 0.7%)

April is winding down, and it has been an ugly month for equity bulls and US dollar bears. It hasn’t been a great overnight session for US S&P 500 futures, either. Yesterday’s promising rally that boosted the S&P 500 by 2.47% soured in aftermarket trading when Amazon earnings and Apple disappointed investors.

The good news was overshadowed by Tech quarterly earnings reports weighing on Wall Street futures.

China hinted at plans for another round of fiscal stimulus. The Politburo promised to meet growth targets without providing any details boosted Chinese stocks, oil prices, and Australia’s ASX 200. Japan’s Nikkei 225 was closed for a holiday. European investors liked the news, and the German Dax is 1.07% higher, leading the other major indexes. WTI oil and gold prices are posting gains while the 10-year Treasury yield inched higher to 2.894%.

EURUSD traded in a 1.0492-1.0592, then slipped to 1.0523 in NY. Ongoing concerns about Russia limit gains while news Germany avoided a recession after Q1 GDP grew at 0.2% q/q, supported prices. Euro area preliminary April CPI rose 7.5% y/y from 7.4% previously. EURUSD technicals are bearish below 1.0570.

GBPUSD climbed from 1.2454 to 1.2579, then dropped to 1.2545.  There is a risk for further gains to 1.2700 if stop losses get triggered above 1.2590-1.2610. UK house prices rose 0.3% m/m in April, (forecast 0.8%).

USDJPY fell from 130.94 to 129.78, undermined by broad US dollar weakness, and concern about FX intervention. Trading was quieter than normal as Japan was closed for a holiday.

AUDUSD rallied from 0.7096 to 0.7178 supported by higher than expected Producer Price data and the China stimulus chatter. NZDUSD followed suit, rising from 0.6488 to 0.6532 with prices getting aboost from improving Consumer Confidence. (actual 81.4 vs March 77.9)

Michigan Consumer Confidence data is up next.

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.6177 (Previous Fix 6.5628)

Shanghai Shenzhen CSI 300 rose 2.43% to 4,016.24

USDCNY peaks at 6.6500 before reversing down to 6.5869, after government authorities promised more economic stimulus

China is closed Monday to Wednesday for May Day holidays

Chart: China 1 month

Source: Yahoo Finance