February 6, 2020
USDCAD open (6:00 am EST) 1.3282-86 Overnight Range 1.3277-1.3286
China announced it would cut tariffs in half on $75 billion of US goods, effective February 14. The Ministry of Commerce said, “China hopes both sides can follow what have been agreed in the deal and make efforts to implement relevant parts of the deal to boost market confidence, to promote bilateral relations, and to help world economic growth.” The announcement was designed to counter claims that the coronavirus outbreak would delay China’s implementation of the Phase 1 trade agreement.
President Trump was acquitted in his impeachment trial, surprising no one except for rabid, Democrats, and left wing media.
Asia equity markets soared led by a 2.38% gain in Japan’s Nikkei 225. European bourses followed suit, albeit with a lot less enthusiasm and S&P futures are suggesting a positive open on Wall Street.
FX markets reacted in a tepid fashion and the G-10 major currencies opened in New York virtually unchanged from Wednesday’s close. GBP was the exception.
Chart: Currency gain/loss (%) against the US dollar from NY close to NY open
Source: Saxo Bank/ IFXA Ltd
GBPUSD dropped from 1.2997 tin Europe to 1.2953 in early New York trading, following a report that the EU would impose tougher financial regulations on the UK Financial sector, the so-called City. The move is a blatant attempt to force global Financial firms to relocate to the EU. GBPUSD is in a downtrend below 1.3035 with a break of 1.3050 targeting 1.2770.
EURUSD was rangebound in a narrow 1.0995-1.1013 band. Prices were weighed down by US dollar demand following yesterday’s surprisingly strong ADP report which showed a gain of 291,000 jobs compared to the forecast of 156,000. The whiff of risk seeking sentiment after rumours of a coronavirus cure added to the downward pressure as did today’s remarks from ECB President Christine Lagarde. She said the low interest rate/low inflation rate world has significantly reduced the ECB and other central bank’s ability to ease monetary policy to respond to a financial downturn. She wasn’t totally negative. She also said that the Eurozone economy is growing in line with their expectations, but inflation remains subdued. Weak German factory orders data also weighed on prices. The EURUSD downtrend is intact while prices are below 1.1030.
USDJPY hung on to yesterday’s gains overnight, chopping about in a 109.78-109.97 range. The improved risk tone from China’s tariff cutting announcement although gains were capped when the US Treasury yield rally stalled.
New Zealand was closed for Waitangi Day, which commemorates the signing of the Treaty of Waitangi in 1840. NZDUSD retreated steadily overnight, falling from 0.6482 to 0.6459. AUDUSD was not any livelier. It traded in a 0.6738-0.6783 range, with prices under pressure after a disappointing December Retail Sales number. (actual -0.5% vs November 1.0%)
Oil prices churned in a $51.05/b-$52.16 range overnight and opened in New York at the bottom of that band. Prices were supported by hopes that Russia would join Opec in cutting crude production again. Prices dropped when Russia’s oil minister said his country was not ready to announce their position.
USDCAD traded quietly in a tight 1.3277-86 band. Prices are supported by weak oil prices although the nascent shift in risk sentiment capped gains. Yesterday’s speech by BoC Deputy Governor Carolyn Wilkins was not a factor in trading. Traders are hoping that tomorrow’s US and Canadian employments provide fresh direction for the currency pair.
Today’s US weekly Jobless Claims data will not have much, if any impact on FX trading. The Canadian calendar is empty.
USDCAD Technical Outlook
The intraday USDCAD technicals are modestly bearish following the break of 1.3280, the uptrend line from January 28. A move below 1.3265 suggests further losses to 1.3190. A break above 1.3305 suggests further gains to 1.3350. For today, USDCAD support is at 1.32405 and 1.3210. Resistance is at 1.3300 and 1.3350. Today’s Range 1.3230-1.3330
Chart: USDCAD monthly
Source: Saxo Bank