June 15, 2020

USDCAD Open (6:00 am) 1.3640-44, Overnight Range: 1.3608-1.3685

• New COVID-19 cases in China, USA, raise fears of second wave outbreak
• China data shows slow economic recovery
• S&P futures are down, suggesting another messy day on Wall Street
• US dollar opens higher vs Commodity bloc  and is flat vs EUR, GBP, JPY, CHF,

Percent change in US dollar since Thursday’s NY open

Source: Saxo Bank/IFXA

FX Recap and outlook:   It’s just another COVID-19 Monday.  An outbreak of new COVID-19 cases in Beijing (51 cases in three days for a city with 21.5 million people) and rising hospitalizations for coronavirus in some American states knocked European equity indices and US equity futures lower, today. Nevertheless, while prices are above 24,990, the uptrend since the end of March is intact.  Oil prices gave back all their June gains since peaking June 7, but they bounced off the overnight low.

Fed Chair Powell’s testimony to Congress on Tuesday will be closely followed to see how he responds to questions, especially following the FOMC’s somewhat bleak economic outlook.

USDCAD peaked at 1.3645 on Friday and closed at 1.3584. It never saw the closing rate again overnight as it climbed to 1.3685 just before Europe opened.  The rally was capped when crude prices climbed off their lows.

USDCAD direction is driven by global risk sentiment, which is negative at the moment,

USDCAD direction is driven by global risk sentiment, which is negative at the moment, due to falling global equity prices and COVID-19 news. Prices were also supported when China May Industrial Production and Retail Sales failed to impress. The results indicate the Chinese economy is improving but the pace of improvement is slow.  Canada CPI and Retail Sales data are due this week, but the results are unlikely to have much impact on FX trading.  The BoC is on hold for the foreseeable futures, and these data points would change their outlook.

EURUSD and GBPUSD mirrored each other, and despite a bit of to-ing and fro-ing, both currency pairs opened unchanged in NY.  The ongoing easing of lockdown restrictions underpinned prices.  Germany and France reopened borders and stores were opening in the UK.

AUDUSD and NZDUSD were weighed down by negative risk sentiment stemming from the China data and COVID-19 news.

USDCAD Technicals:  The USDCAD technicals are bullish above 1.3620, looking for a break of resistance in the 1.3680-90 area, to extend gains to 1.3790.  However, the intraday rally is very steep, suggesting a break below 1.3620 would lead to 1.3540-1.3680 consolidation, at least temporarily.  For today, USDCAD support is at 1.3620and 1.3580. Resistance is at 1.3680 and 1.3730. Today’s Range 1.3610-1.3690.

Chart: USDCAD 4 hour

Source:  Saxo Bank