December 7, 2020
- “Hard-Brexit” fears sink sterling
- Risk sentiment sours as US COVID cases soar
- USDCAD reluctantly rallies from multi-year low
FX Ranges at a Glance:
Source: IFXA Ltd/RP
FX Recap and Outlook: Brexit, COVID-19, and US stimulus plans caused FX markets to churn. Naturally, Brexit headlines caused the most excitement. China‘s Trade surplus widened, led by a 21.1% surge in exports. The US reported 181,336 new coronavirus cases yesterday. .
US Congress is reportedly preparing legislation for a $900 billion stimulus package today.
GBPUSD peaked in Asia and plunged to 1.3226 in Europe following news the weekend Brexit negotiations did not yield any progress. The three sticking points (fishing, governance, and level playing field) continue to stick, and a deal hangs in the balance. The talks continue. EU Chief Negotiator Michel Barnier was described as “pessimistic about achieving a deal.”
EURUSD traded with a negative bias in a 1.2080-1.2139 range, dropping alongside the rest of the G-10 majors as risk sentiment soured over Brexit. The EURUSD slide appears to be a correction as the technical and fundamental outlook are bullish.
USDJPY traded in a 103.95-104.30 range. Firm US Treasury yields offset safe-haven demand for yen.
AUDUSD and NZDUSD traded lower on the back of broad US dollar strength. However, China trade data helped limit losses.
Today, the US data calendar is light. Canada’s Ivey PMI index is due.
USDCAD: The USDCAD sell-off bounced off support in the 1.2774 area on Friday, then traded sideways in Asia. Prices started climbing in Europe, but the rally stalled at 1.2831. USDCAD downside continues to be driven by broad US dollar sentiment. Prices accelerated lower Friday after Canada’s employment report beat expectations while US NFP missed.
FX analysts are suggesting that USDCAD will continue to slide due to a) high correlation with US equites, b) surge in commodity prices, including copper 3) firm crude oil prices which are underpinned by plans for a modest Opec production increase 4) expectations for a global economic boom in 2021 with Canada GDP to rise 5.5% in 2021 helped by addition fiscal stimulus 5) reduced geopolitical tensions under Joe Biden. Massive government deficits, and inflation risks are not much of a concern. In that environment, USDCAD will continue to attract selling interest on rallies.
USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.2840, looking for a break below the 1.2750-75 zone, to extend losses to 1.2500. For today, USDCAD support is at 1.2770, and 1.2740. Resistance is at 1.2840 and 1.2880. Today’s Range 1.2770-1.2870
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank