UK employment underpins GBPUSD
US dollar choppy, opens lower
FX at a Glance
Canada’s ruling Liberal party released their first budget in over two years. It is a 724-page door-stopper that brazenly hijacks the NDP’s child care program plans. It reads like the Liberal re-election manifesto. The budget forecasts a $354 billion deficit compared to their forecast of $381 billion last fall. USDCAD drifted higher ahead of the budget, rising to 1.2532 when released, then dropped to 1.2481 overnight. Prices climbed back to 1.2523 in NY trading, coinciding with a retreat in EURUSD.
Asia equity indexes followed Wall Street’s lead and closed with small losses. The selling trend continued in Europe, with the French CAC index falling 1.33% and leading the other major bourses lower. S&P 500 futures are in the red, suggesting a negative open on Wall Street. Gold prices inched down from their recent peak while WTI oil prices gained 1.0%.
EURUSD rallied, rising from 1.2037 to 1.2079, then dropped to 1.2040 in early NY trading while ignoring the rise in 10-year US Treasury yields, which are at 1.60%. The single currency is consolidating recent gains between the 200-day moving average (1.1912) and the 100 day moving average (1.2057). Prices are likely to consolidate within a 1.1980-1.2080 ahead of Thursday’s ECB monetary policy meeting.
GBPUSD bounced in a 1.3971-1.4008 range. Prices topped out at 1.4008 after the UK employment data, then dropped to 1.3955 in NY trading. GBPUSD is underpinned by fresh optimism around the outlook for the UK economy.
The employment report was better than expected, but analysts consider the results to be “dodgy,” skewed by government employment programs. A break above 1.4020 targets the February peak in the 1.4240 area.
USDJPY rejected weakness below 108.00 and rallied to 108.54, supported by Treasury yield gains and the US dollar gains during the European session. The Bank of Japan Stability Report said that the financial system was stable, and that the pandemic continues to inflict economic damage. It added that risk sentiment was improving.
AUDUSD rallied to 0.7814 from 0.7756 due to broad US dollar weakness. The minutes from the April 6 RBA monetary policy meeting did not provide any drama, and traders are awaiting Retail Sales data tomorrow.
USDCAD has retraced its entire overnight move reaching 1.2538 in early NY trading. Prices dropped to 1.2481 due to widespread US dollar selling against the G-10 majors. However, the sellers disappeared as global equity markets wobbled, and Treasury yields climbed. Even so, USDCAD is well below where it was a week ago.,
The Bank of Canada is expected to announce it is tapering QE purchases at its monetary policy meeting on Wednesday. BoC officials insist the move will be technical and not a shift in policy.
The US and Canadian economic data cupboards are bare.
The intraday USDCAD technicals are bearish. The bounce from 1.2480 is a correction while prices remain below 1.2590, a level guarded by the two-week downtrend line at 1.2550. A decisive break above 1.2590, suggests a short-term base is in place at 1.2480. A move below 1.2480 targets 1.2440. For today, USDCAD support is at 1.2480 and 1.2440. Resistance is at 1.2550 and 1.2580. Today’s Range 1.2480-1.2560
Chart: USDCAD 4 hour
FX open, high, low, and previous close
Source: Saxo Bank