Photo: IFXA Ltd

March 19, 2021

USDCAD open (6:00 am ET) 1.2484-88,  Overnight Range 1.2464-1.2510,  Close 1.2485

FX Ranges at a Glance 

Source: IFXA Ltd/RP

FX Recap and Outlook:  Canadians are sitting on their wallets.  Retail Sales fell for the second consecutive month, falling 1.1% in January. USDCAD did not budge on the news.  It is not all doom and gloom.  Statistics Canada predicts that February Retail Sales will rise 4.0%.

Yesterday, Financial markets expressed displeasure with the Fed’s interest rate forecasts.   US 10-year Treasury yields soared, Wall Street stocks dropped, oil prices plunged, and FX markets churned.  

The major Asia equity indexes followed Wall Street’s lead and closed in a sea of red.  European bourses are trading lower while  S&P Futures are a touch firmer.  Gold and Oil are a tad higher as well

The major trading theme continues to be concern that the Fed is out to lunch with its interest rate outlook.  The US/China Summit in Alaska is a bit of a distraction because both sides are chirping, but so far, not tweeting.

US 10-year Treasury yields are at an elevated 1.694% but below yesterday’s peak of 1.753%.  At the moment, traders appear determined to drive yields to a level that elicits a response from the Fed.

EURUSD traded sideways in Asia and rather erratically in Europe.  Prices climbed from the Asia low of 1.1902 to 1.1936 just before NY opened, then plunged to 1.1892.  German PPI jumped to 1.9% y/y from 0.9% in January, but it wasn’t a factor for traders.  The intraday EURUSD technicals are bearish below 1.1960, looking for a decisive break below 1.1890 to test 1.1810.

GBPUSD continues to churn inside a 1.3890-1.3990 range, with broad US dollar price action determining direction. UK Consumer Confidence was -16, better than the -20 forecast and February’s -23 result. Even so, it is well below its long-run average of -9.  The short term GBPUSD technicals are bullish above 1.3810

USDJPY bounced in a 108.62-109.12 range with plenty of to-ing and fro-ing. The Bank of Japan delivered as expected. They left rates unchanged and tweaked their yield curve control strategy by widening the trading band from +/-.20% around 0 to +/- .25%.  Prices are off their peak as US Treasury yields traded lower. Japan’s National CPI index fell 0.4%, which was worse than the forecast for a 0.2% decline.

AUDUSD traded in a 0.7726-0.7771 range.  Prices suffered from weaker than expected Retail Sales, which declined 1.1% in February, rather than rising 0.4% as forecast.  Softer commodity prices were another negative for the currency.

WTI oil prices have recouped a small portion of yesterday’s 10.0% plunge. Prices dropped from $64.75/barrel to $58.30 yesterday, on the back of the broad US dollar rally.  Traders were also concerned that the slow pace of vaccines in many countries would delay the expected global economic rebound.  Goldman Sachs analysts said the price drop represented a buying opportunity which helped halt the slide.

USDCAD touched 1.2367 in Europe yesterday and then soared, reaching 1.2525 just before the close.  The combination of rising US Treasury yields and plunging oil prices fueled the rally.  Prices are not expected to garner any support from today’s economic data.

Retail Sales are expected to have dropped 3.4% in January, adding to the 3.0% drop in December.  However, the data is stale, so any impact on prices will be fleeting.

The US economic calendar is empty, leaving Wall Street and Treasury yields to determine FX direction.

USDCAD Technicals:  The intraday technicals  are bullish following the move above 1.2460 which now reverts to support.  A decisive break above 1.2520 targets 11.2570, while a move below 1.2460 negates the upside pressure.  Longer term, the daily chart shows an “outside reversal” pattern which occurs when the day’s high and low exceeds the previous day’s range, which is usually a bullish indicator.  For today, support is at 1.24600 and 1.2410    Resistance is at 1.25200 and 1.2570. Todays Range 1.2460-1.2530.

Chart: USDCAD daily

Source:  Saxo Bank

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