February 12, 2020

USDCAD open (6:00 am EST) 1.3269-73   Overnight Range 1.3267-1.3294

China said the number of new coronavirus cases reported daily is shrinking and Tuesday, senior Chinese epidemiologist Zhong Nanshan said the epidemic would peak this month.  Asia equity indexes closed with gains, European bourses are higher, and US equity futures point to another positive open for Wall Street.  Oil prices rallied as did US Treasury yields, while gold prices inched lower. However, World Health Organisation officials are a tad less optimistic due to coronavirus cases arising in other countries.

Fed Chair Jerome Powell stayed true to the January 29 FOMC statement in yesterday’s testimony to Congress.  He acknowledged coronavirus “challenges,” but said the economy was in a “a very good place.”

FX traders jumped aboard the risk-seeking bandwagon, although there are still plenty of seats. The New Zealand dollar led the G-10 major currencies higher at the New Yorke open.

Chart: Currency gain/loss (%) against the US dollar from New York close to New York open

Source:  Saxo Bank/IFXA

FX Recap and outlook: R isk sentiment may have improved, but it wasn’t evident to EURUSD traders. The single currency traded lower in Asia, reversed the move in Europe, and opened unchanged in New York.

German political developments, the dovish ECB outlook, and bearish technicals following the break of support at 1.0940 are weighing on EURUSD. ECB officials continued to extol the virtues of accommodative monetary policy. Price action is hampered by reports of around $1.6 billion of option expiries with strikes in the 1.0900-10 area.

GBPUSD is inching above the overnight high of 1.2980 and looking to test resistance in the 1.3000-10 area. UK Chancellor Sajid Javid, in a photographed briefing paper leak, expects the EU to grant the City of London, a “permanent equivalence” regime. If so, it would prevent the mass-exodus of London financial market jobs to the EU. The EU chief negotiator Michel Barnier replied, “don’t kid yourself.” Nevertheless, GBPUSD intraday technicals are bullish while prices are above 1.2930 with a break above 1.3010 targeting 1.3070.

USDJPY is struggling to extend gains above 110.00. Prices are supported by improved risk sentiment, and the overnight rise in 10-year US Treasury yields from 1.582% to 1.626%.

They have slipped to 1.613% in New York, which weighed on the currency pair.

NZDUSD soared.  The RBNZ left the Overnight Cash Rate (OCR) unchanged at 1.0%, which was expected but shifted to a more hawkish outlook, which took traders by surprise.  The central bank expects the coronavirus outbreak to lead to have a modest, but negative impact on the economy. The risk of a 2020 rate cut reportedly dropped to 45%. NZDUSD climbed to 0.6483 from 0.6404.  AUDUSD tracked Kiwi higher, with prices underpinned by improved risk sentiment.

Oil prices surged as risks from the coronavirus were downgraded.  Traders are looking ahead to today’s release of Opec’s monthly oil market report for clues to further direction.

USDCAD dipped alongside the gains in the Antipodean currencies, but further losses may be limited. Rail blockades by various Indigenous factions have disrupted rail traffic, Canada wide.  Authorities are content to stand and watch, for now.  Bank of Canada Governor Stephen Poloz avoided -4 C temperatures in Ottawa, to join aa panel at the Australia Canada economic summit In Melbourne where the temperature is a balmy 22C.

There aren’t any notable economic data releases today.USDCAD Technical Outlook

The intraday USDCAD technicians flipped to bearish with the overnight break of support in the 1.3280 area.  A minor downtrend from the February 10 peak of 1.3322 is intact under 1.3280.  A break of support at 1.3260 targets 1.3215 and then 1.3180. A move above 1.3280 puts the focus on gains to 1.3350. For today, USDCAD support is at 1.3260 and 1.3215.  Resistance is at 1.3280 and 1.3310.  Today’s Range 1.3230-1.3280

Chart: USDCAD 4 hour

Source: Saxo Bank