March 25, 2020

USDCAD open (6:00 am EST) 1.4322-26    Overnight Range 1.4299-1.4481

  • US Government agree to $2 trillion stimulus package to combat COVID-19
  • Canada government ok’s $82. 0 billion spending bill
  • Asia stock markets rally, European bourse are mixed and S&P Futures flip from positive to negative
  • Oil prices climb on government spending announcements but erase gains in NY trading
  • US dollar opened in NY with losses across the board, but those losses have been pared in early NY trading.  Nevertheless, the greenback is still weaker than where it was at the close.

Chart: Currency gain/loss (%) against the US dollar from NY close to NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:  There is nothing like a few trillion in government dollars to help ease the pain from the COVID-10 outbreak.  The US politicians finally agreed to a deal in the wee hours of the morning today. They approved plans for issuing $1,200 checks to many Americans, creating a $367 billion small business loan program and a $500 billion program for industries, cities and states.

Asia equity markets rallied ion the heels of the steep 11.36% gain in the Dow Jones Industrial Average (DJIA) on Tuesday, then accelerated on the announcement of the US stimulus package deal.  Japan’s Nikkei 225 index rose 8.04%.  The major European bourses rallied but not to the same degree.  The German DAX gave back all its overnight gains in early NY trading. US equity futures are traded higher in Asia but are pointing to a negative open on Wall Street.

The oil price rally seen in Asia, stalled in Europe and prices reversed the entire overnight move.

WTI climbed from $23.10/barrel just before yesterday’s close, reaching $25.20/b after the API weekly crude stocks report showed US inventories fell 1.23 million barrels.  COVID-19 reports showing pictures of deserted streets from locked-down cities led to prices retreating to $23 .15 in NY today.

EURUSD climbed steadily overnight, rising from 1.0762 to 1.084, opened in NY near the peak and dropped steadily since, reaching 1.0813 as of 5:30 am PDT.   News of the US stimulus package, combined with last week’s ECB stimulus measures, gave traders who were short EURUSD, an excuse to book some profits.  Worse than expected German IFO survey results were ignored.

GBPUSD mirrored EURUSD moves, rising to 1.1972 from 1.1751. UK fiscal and monetary stimulus packages combined with the news of the US $2 trillion package fueled the rally. UK February CPI rose 0.4%, beating the forecast for a 0.3% rise.  February Retail Price index rose 0.5% as expected. NY traders knocked GBPUSD from its opening level of 1.1972 to 1.1879.

USDJPY bounced in a 110.76-111.56 band.  Prices were supported by safe-haven USDJPY selling trades being unwound, while relatively soft US treasury yields limit gains. A minor resurgence in US dollar demand since today’s NY open lifted USDJPY to 111.40.

AUDUSD and NZDUSD rallied on the back of broad US dollar selling. The RBA was actively pumping liquidity into financial markets, announcing it bought $900 million of semi-government bonds.

USDCAD dropped from 1.4460, where it closed yesterday to 1.4299 just before NY opened, then bounced to 1.4370. The minority Canadian government secured a deal with opposition parties for the planned $82.0 billion COVID-19 stimulus plan.  The deal was in question when the Liberal caucus tried to give themselves unlimited tax and spend powers without the need for parliamentary approval, which is akin to leaving the brewery doors open for a Frat party.  USDCAD continues to track oil price movements.

US Durable Goods Orders rose 1.2% in February but markets do not care.    The results are pre-COVID-19 and stale.   The focus will continue to be the spread of coronavirus throughout the US.   Travelers from NY city are being told to self-quarantine for 14 days.

USDCAD Technical Outlook

The USDCAD technicals continue to be useless as markets react violently to headlines and rumours while ignoring fundamentals in a poor liquidity environment.   Nevertheless, USDCAD is in a mild uptrend while prices are above 1.4290, looking for a break of 1.4420 to extend gains to 1.4530.  For today, support is at 1.4290 and 1.4220.   Resistance is at 1.4420 and 1.4530.  

Chart: USDCAD 4 hour

Source: Saxo Bank