July 10, 2020
USDCAD Open (6:00 am) 1.3600-04, Overnight Range: 1.3578-1.3630
- AUD, NZD, and CAD higher to start week
- France stimulus plan helps underpin EURUSD
- Oil traders cautious ahead of Wednesday Opec meeting.
- US dollar opens with mixed tone in NY
Percent change in US dollar NY open-NY open
Source: Saxo Bank/IFXA
FX Recap and outlook: Equity traders think all is right with the world. A 2.22% gain in Japan’s Nikkei 225 index, put European traders in a buying mood. The major bourses are all higher, as are US equity futures, in anticipation of “good news” from the start of earnings season.
Oil traders are less sanguine on the outlook for crude prices. They are concerned that Opec will turn on the taps at the beginning of August, eliminating the2.2 million barrel per day production cut, enacted in April. Global demand is expected to increase, although ongoing COVID-19 issues in the US may be problematic in the near term.
EURUSD had a chaotic overnight session. Prices climbed from Friday’s close of 1.1301 to 1.1332 in Asia, then reversed the move in Europe. Talk that France would introduce a new fiscal stimulus plan, which includes tax cuts for companies, underpinned the single currency. However, the to-ing and fro-ing price action is just noise as the month-long 1.1170-1.1360 range is intact, and the ECB meeting is waiting in the wings.
The Bank of Canada policy meeting is Wednesday.
GBPUSD peaked in Asia at 1.2665 and is hovering just above the overnight low of 1.2599 in NY trading. EU/UK trade talks resume this week, and traders are reluctant to extend GBPUSD gains, due to a lack of progress in the negotiations. GBPUSD technicals are bearish below 1.2680.
USDJPY climbed to 107.09 from 106.80 on the back of rising global equities and higher US 10-year Treasury yields. The ongoing downtrend is intact below 107.30. The Bank of Japan monetary policy meeting is Wednesday.
AUDUSD and NZDUSD continue to track broad US dollar moves, although AUD has outperformed NZD.
USDCAD rallied alongside the antipodean currencies, buoyed by the improved risk tone, stemming from the global equity market rally. The dip in WTI oil prices was not a concern. The Bank of Canada meeting is Wednesday. No change in interest rates is expected, although the statement is sure to remind readers about continuing uncertainty to the outlook. Friday’s news that Canada recouped 963,000 jobs looks good, but, the combined May/June job gains, are barely more than 1/3 of the total number lost since March.
Chart 2020 Canada employment change
Source: Stats Canada/IFXA
The US and Canadian economic calendars are bare, leaving FX markets to dipsy-doodle inside their well-defined ranges.
USDCAD Technicals: The short term technicals are bullish above 1.3505 looking for a break above 1.3650 to extend gains to 1.3700. A break below 1.3505 targets 1.3270. For today, USDCAD support is at 1.3510 and 1.3470. Resistance is at 1.3580 and 1.3630. Today’s Range 1.3530-1.3630
Chart: USDCAD 4 hour
Source: Saxo Bank