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April 30, 2021

Eurozone sinks into another “technical” recession

Canada economy grows 0.4% in February

US dollar opens firmer, but ends April with losses across the board

USDCAD open 1.2277-81,  Overnight Range 1.2268-1.2287, close 1.2280

FX at a Glance

FX Recap and Outlook

The Canadian economy grew a tad less than forecast in February, but it was the 10th consecutive monthly increase.  The economy grew 0.4% m/m compared to expectations of 0.5% and Statistics Canada noted “economic activity remains about 2.0% below the February 2020 level.” March  Industrial Product and Raw Material Price Indexes were lower than February levels.

USDCAD popped to 1.2280 from a pre-GDP level of 1.2268 but the move reversed just as quickly as the news didn’t do anything to alter the Loonie’s positive outlook.  USDCAD sentiment is bearish due to the Bank of Canada implying higher interest rates, sooner than expected, and by forecasts for higher commodity prices.  Canada’s is expected to enjoy a robust, post-pandemic boom fueled by Federal spending, and spill-over benefits from US stimulus programs.

Overnight, Asia equity markets closed lower after a subdued session.  The Nikkei ended April down 1.95%, but the other major indexes ended higher for the month.  European bourses are trading flat to higher on their way to ending April with solid gains.  S&P 500 futures are trading lower, but the Index is poised to finish the month with gains above 4.5%.  10-year US Treasury yields are 1.644%.  Gold and oil prices have dipped.

EURUSD dropped from 1.2126 to 1.2078 in NY.  Eurozone April CPI rose 1.6% as forecast, but the increase was dismissed due to pandemic base effects.  Q1 GDP fell 0.6% q/q, (forecast -0.8% ) and confirming a technical recession. .  The results also highlight the Eurozone underperformance compared to the 6.4% Q1 GDP growth in the US.  EURUSD is vulnerable to rising US Treasury yields which could spark new demand for US dollars.  However, the April uptrend is intact above 1.2060.

GBPUSD failed to extend gains yesterday, and the fall below 1.3920 overnight targets the 1.3860-70 area.   GBPUSD is being pressured by profit-taking following this weeks’ GBPJPY rally.  The positive GBPUSD outlook is underpinned  a series of better than expected UK economic data recently,  including robust Retail Sales and Service PMI indicators.  

USDJPY rallied this week after breaking the  April downtrend on Monday.   Price rallied to 109.20 from 107.98, fueled by rising Treasury yields around the FOMC meeting.  The currency pair is trading near the top of its overnight 108.72-109.05 range.

NZDUSD is ending April as the second-best performing major G-10 currency, posting a 3.8% gain.  Prices climbed from 0.6950 to 0.7283 yesterday, and are slightly above yesterday’s close.  The April ANZ Consumer Confidence index at 115.4 (previous 110.8) underpinned prices overnight. 

AUDUSD tracked broad US dollar sentiment and is trading in the middle of its 0.7749-0.7783  overnight range.  Australia PPI was 0.4% q/q compared to 0.5 q/q previously.

Today’s US data includes Chicago PMI, and Michigan Consumer Sentiment.

USDCAD Technical Outlook

The  intraday USDCAD technicals are bearish below 1.2320, looking for a move below 1.2250 to extend losses to 1.2210. A break above 1.2330 targets 1.2380.  For Today, USDCAD support is 1.2250 and 1.2210.  Resistance is at 1.2310 and 1.2350.  Today’s Range 1.2240-1.2310

Chart: USDCAD 4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank