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January 22, 2021

  • Canada Retail Sales soar in November
  • Canada Retail Sales on tap-forecast 0.1% m/m
  • Mild risk aversion sentiment lifts US dollar

USDCAD open (6:00 am ET) 1.2700-04,  Overnight Range 1.2637-1.2715, Previous Close 1.2640

FX Ranges at a Glance:

Source: IFXA Ltd/RP

FX Recap and Outlook:   The week ends with traders looking to bank some profits, encouraged by a wave of soft “flash PMI reports. Asia equities closed on a negative note, while European bourses are giving back some of this week’s gains as well.

Wall Street futures have pulled back from yesterday’s peaks.  Gold prices slumped, and WTI oil got hammered.

EURUSD climbed from 1.2153 to 1.2189 while ignoring the whiff of “risk-off” sentiment that was undermining equity markets.  Traders dismissed the Eurozone Flash PMI data.  Composite PMI fell to 47.5 from 49.1, prompting the HIS Chief Economist to say “A double-dip recession for the eurozone economy is looking increasingly inevitable as tighter COVI D-19  restrictions  took a further toll on businesses in January.”

The intraday EURUSD technicals are bullish above 1.2120 looking for a test of 1.2230.

GBPUSD dropped from 1.3735 to 1.3653, due to a mix of profit-taking, poor data, and coronavirus concerns. UK PMI data was ugly.  IHS/Markit said “Steepest fall in UK private sector output since last May as third national lockdown hits service economy at start of 2021.”  December Retail Sales were lower than expected. (actual 0.3%m/m vs forecast 1.2% m/m).  GBPUSD continues to consolidate gains in a 1.3460-1.3760 range.

USDJPY traded firmer in a 103.50-70 range.  Weak inflation which fell 1.2% y/y in December and the dip in US Treasury yields from this week’s peak, limited gains.

AUDUSD and NZDUSD dropped under a wave of profit-taking due to the bout of negative risk sentiment.  NZDUSD outperformed against AUDUSD due to New Zealand inflation rising to 0.5% q/q compared to forecasts for 0%.  Australia Composite PMI edged higher to 57.2 from 55.7 in December.

WTI oil fell to $51.63/b from $53.13 due to concerns of weak demand due to the coronavirus, and concerns about rising inventories.

USDCAD caught a bid in Asia, and never looked back.  Prices climbed steadily rising, from 1.2637 to 1.2711 in Toronto trading, in a profit-taking rally, due to a minor bout of risk aversion, and a drop in oil prices.  Markets may have realized that the USDCAD drop to 1.2596 yesterday was a wrong-footed move.  Some analysts believed the Bank of Canada was mildly hawkish due to their upward GDP growth revisions and tapering comments.

However, bad news on the domestic vaccine front in the face of high numbers of coronavirus cases, and stringent containment measures, suggest a domestic economic recovery will take longer to occur, and will be far less robust than anticipated.

Canada Retail Sales rose by a stellar 1.3% in November, the fastest pace since September and the seventh consecutive monthly gain.  Unfortunately, USDCAD traders were not impressed as the currency remained unchanged, near its overnight peak.

USDCAD Technicals:   The intraday technicals flipped to bullish with the bounce above 1.2660.  A break above 1.2730 targets a retest of the downtrend line at 1.2800. The daily charts suggest further upside as well. For today, USDCAD support is at 1.2650 and 1.2610.  Resistance is at  1.2730 and 1.2780. Today’s Range 1.2650-1.2740

Chart: USDCAD daily

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank