January 20, 2020
USDCAD open (1.3068-71) 6:00 am EST) Overnight Range (1.3057-1.3070)
US Markets are closed today to celebrate a man “who had a dream,” while the global elite and the global wannabe elite head to Davos, Switzerland. Attendees at the Summit may soon be muttering “I’m having a nightmare.” That’s because that paragon of climate-change virtue Greta Thunberg, using the full might of her grade nine education, will be lecturing and shouting “How dare you” at attendees such as President Trump, Angela Merkel, and other politicians, and posers.
Asia equity indices followed Wall Street’s lead and closed higher. European bourses were not as robust and are mixed to flat at the Toronto open. The US dollar closed last week with gains against the G-10 majors except for GBP and CHF. It started this week with gains across the board.
FX overnight snapshot
Source: Saxo Bank/IFXA
FX price action will be minimal today due to the US holiday, but things will get a tad busier the rest of the week. The Bank of Japan monetary policy decision is tomorrow, followed by the Bank of Canada on Wednesday and the European Central Bank on Thursday. All three meetings are expected to be anti-climatic, with interest rates and policy left unchanged. The bulk of this week’s US economic data releases are second tier.
GBPUSD bounced in a 1.2964-1.3007 range overnight. It gapped lower at the Asia open, which was quickly filled. Traders were spooked by comments from Chancellor of the Exchequer Sajid Javid who said the UK would not seek realignment with the EU on future trade agreements.
EURUSD traders were not thrilled by Javid’s remarks either. After trading sideways in Asia, EURUSD dropped from 1.1101 to 1.1083. The EURUSD technicals are bearish below 1.1160, looking for a break of support in the 1.1060-80 area to extend losses to 1.0950.
USDJPY was stagnant. US Treasury yields and risk sentiment is stable, leaving traders to await the results of the BoJ meeting tomorrow. The USDJPY technicals are bullish above 109.70, looking for a test of 110.70.
AUDUSD is drifting toward the bottom of its 0.6850-0.6950 range that has contained price action since January 6. Traders are opening for direction from Thursday’s inflation and employment reports.
Oil prices spiked at the Asia open. WTI oil closed at $58.81/b on Friday and opened at $59.60/b in Asia, due to supply concerns. Libya’s national oil company declared “Force Majeure” when tow major crude production bases were shut down. Prices quickly filled the opening gap and are trading in Toronto where they closed on Friday.
USDCAD is tracking broad US dollar sentiment, and that sentiment is bullish. Domestic influences will come to a head Wednesday when CPI, Housing Starts, and Wholesale Sales data are released just before the BoC’s releases the quarterly Monetary Policy Report and Governor Poloz’s press conference.
USDCAD Technical Outlook
The USDCAD technicals are bullish while prices are above 1.303, looking for a break of resistance in the 1.3080-90 area to extend gains to 1.3225, which is the 76.4% Fibonacci retracement level of the Dec.2/Jan6 range. A break below 1.3020 negates the topside risk and argues for further 1.2950-1.3060 consolidation. For today, USDCAD support is at 1.3030 and 1.2990. Resistance is at 1.3080 and 1.3110. Today’s Range 1.3030-1.3110
Chart: USDCAD 4 hour
Source: Saxo Bank