Dovish Fed keeps US stock markets at record levels
US dollar recoups some losses, poised to closed mixed for the week
USDCAD open 1.2591-95, Overnight Range 1.2544-1.2609, close 1.2560
Weekly FX at a Glance
FX Recap and Outlook
Canadians returned to work in a big way in March. There were 303,100 new jobs, blowing away the consensus forecast for a gain of 100,000. The unemployment rate dropped to 7.5%. Unfortunately, the results are unlikely to be repeated in April. Ontario ordered residents to stay at , except for necessities and not to travel outside their region. It is illegal to gather indoors with anyone you do not live with and outside gatherings are limited to 5 people. Retail outlets are closed except for curbside service. The big box stores are limited to what products they can sell. Quebec, Manitoba, and Alberta have similar restrictions although for retail outlets they may be less onerous than Ontario’s.
Those restrictions are not conducive to increased employment, which suggests the April report may see all of the March gains reversed. FX traders figured that out quickly, which is why, despite the blow-out numbers, USDCAD only dropped to 1.2544 from a pre-data level of 1.2585 level.
The USDCAD remains trapped in a 1.2500-1.2650 range which has contained prices since March 22, but it has a negative bias. Resistance stems from expectations for another jump in oil prices in the second half of the year, and a robust domestic economic recovery. However, fears of an inflation fueled rise in interest rates, despite central bankers claims to the contrary, are underpinning prices.
The US dollar recouped some of yesterday’s losses in a cautious overnight session. US 10-year Treasury yields are sitting at 1.667% in early NY, and S&P futures are off their overnight peak, but a tad higher from where they closed. European bourses are flitting around unchanged. Asia equity indexes closed with losses except for Japan’s Nikkei 225, which squeezed out a 0.20% gain. Gold prices slipped from yesterday’s $1755.52 close, while WTI oil is close to unchanged at $59.76.
EURUSD retreated from 1.1919 in Asia then consolidated in a 1.1868-1.1897 band. Soft German trade and Industrial Production data put negative pressure the currency. A move below 1.1850 today would extend losses to 1.1810.
GBPUSD dropped from 1.3749 to 1.3671 but recouped some of the losses in NY trading. reaching 1.3722 but it is still the worst-performing major G-10 currency this week. There is not a specific catalyst for the sell-off, and the uptrend from last May is intact above 1.3620.
USDJPY recovered all of yesterday’s losses, rising from 109.27 to 109.96 in NY trading. The gains were supported by an uptick in US 10-year treasury yields which rose from 1.63% to 1.674%.
AUDUSD is choppy inside a 0.7590 to 0.7660 range. The currency pair was supported by higher than expected CPI and PPI data.
Today’s US data is second-tier and won’t be a concern for FX markets.
The USDCAD technicals are neutral. The currency pair is trapped in a 1.2500-1.2650 consolidation range, albeit with a bearish bias while prices are below 1.2650. A topside break would extend gains to 1.2750 while a break of 1.2500 targets 1.2440. For today, USDCAD support is at 1.2540 and 1.2510. Resistance is 1.2620 and 1.2650. Today’s Range 1.2530-1.2610
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open, high, low, and previous close
Source: Saxo Bank