April 8, 2020

USDCAD open (6:00 am EST) 1.4010-14    Overnight Range 1.3993-1.4080

  • Positive risk sentiment fades with spike in US COVID-19 death toll
  • EU Finance Ministers fail to agree to coordinated coronavirus response
  • Oil trader’s hopeful for Opec/Russia price support deal
  • US dollar recoups yesterdays losses

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:  Hopes that the coronavirus outbreak was beginning to plateau shattered yesterday when the US reported a record-high 24-hour death toll.  Today, the World Health Organisation (WHO) warned “To think we are coming close to an end point would be a dangerous thing to do. The virus leaves no room for error or complacency.” 

However, the WHO’s credibility is shot. President Trump thinks so.  He tweeted “The W.H.O. really blew it. For some reason, funded largely by the United States, yet very China centric. We will be giving that a good look.  Fortunately I rejected their advice on keeping our borders open to China early on. Why did they give us such a faulty recommendation?”

Asia equity indexes were mixed while European bourses were all deep in the red.  S&P 500 futures are flitting between positive an negative.

EURUSD traded with a negative bias, in part due to a poor risk sentiment.  Traders were also unhappy with news the EU Finance Ministers couldn’t agree to a coordinated Covid-19 response. A report from the German Institute for Economic research warning Germany was on the verge of the worst quarterly economic slump ever measured, didn’t help sentiment. The single currency is sitting in the middle of its 1.0831-1.0901 range in early New York trading.

GBPUSD dropped from 1.2339 to 1.2289 in Asia but clawed back the losses in Europe and its trading in NY at 1.2332.  GBPUSD garnered a little support because of the EU’s failed to come up with a unified COVID-19 response.

USDJPY traded sideways. Traders were not concerned with a Reuters story suggesting that the Bank of Japan will forecast a drop of 2.1% in 2020 GDP growth, as the Japanese are in the same economic boat as the rest of the G-7.

AUDUSD dropped from 0.6170 at yesterday’s close to 0.6117 after S&P downgraded Australia’s debt rating to AAA negative. Prices fully recovered by the New York open, in part because Australia will be an early beneficiary when China’s economy ramps up.

WTI oil prices are consolidating losses in a $23.60-$24.60/barrel range, after peaking at $28.14/b on Tuesday.

WTI tested the bottom after the API weekly crude stocks report showed inventories rose 11.93 million barrels last week. There are concerns that gains from an Opec/Russia production support agreement would be limited do to an oversupply of crude.

USDCAD sank with yesterday’s optimism that US coronavirus cases may have plateaued and rallied when those hopes were proved to be misplaced.   Traders ignored yesterday’s Canadian Ivey PMI index (actual 26 vs February 24) will do the same with today’s Housing Starts and Building permits data.

Currency price action will continue to track broad US dollar sentiment.  S&P futures traded either side of flat overnight and are currently in the green.  Additional gains may turn risk sentiment positive, which would undermine the US dollar.

USDCAD technical outlook:

USDCAD continues to consolidate inside at 1.3940-1.4340 band.  The intraday technicals are bearish while prices are below 1.4060.  However, support in the 1.3940 area held.  A break above the 1.4060-80 area targets a retest of 1.4185 while a move below 1.3940 targets 1.3780.

Chart: USDCAD 1 hour

Source: Saxo Bank