January 28, 2021
- Wall Street poised to open flat,
- Robust US data improves risk sentiment
- US dollar trying to recoup overnight losses in early NY trading
USDCAD open (6:00 am ET) 1.2854-58, Overnight Range 1.2798-1.2879, Previous Close 1.2803
FX Ranges at a Glance:
Source: IFXA Ltd/RP
FX Recap and Outlook: Retail traders on social media site Reddit “stuck it to the man,” and GameStop Corp short-sellers turned green. Many Wall Street “masters of the universe” describe retail traders as ”unsophisticated,” yet the unsophisticated are schooling the pro’s in the art of Keynesian economics. At least the part of the economic theory that deals with irrationality and solvency.
Wall Street closed with hefty losses, which makes sense considering the hefty gains seen recently. Asia equity traders followed the NY lead. The UK FTSE100 led European bourses down, and Gold and oil prices are lower.
Traders continue to digest talk of vaccine shortages in some areas alongside concerns about highly contagious mutant virus strains. Incessant talking about an equity market bubble may have encouraged some profit-taking.
The FOMC meeting did not offer up any surprises. Fed Chair Powell tried to put a lid on “taper talk” saying “ It is premature.”
The risk landscape improved greatly this morning, after the US data dump. Q4 GDP rose 4.0% . The Bureau of Labor Statistics said “the increase in real GDP reflected increases in exports, nonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending and federal government spending.”
Weekly Jobless claims were 847,000 well below last week’s914,000 increase. The US dollar retreated against the G-10 majors following the data.
EURUSD traded down to 1.2082 before rebounding to 1.2142 following today’s US data. Finland Central Bank Governor Ollie Rehn echoed Dutch Central Bank Governor Klaas Knot’s comments from yesterday when he said “We are closely monitoring developments in the exchange rate, especially regarding the inflation outlook.” Is there a pattern?. Eurozone Consumer Confidence, Industrial Confidence, Sentiment and Business Climate reports were ignored.
GBPUSD traded with a negative bias falling from 1.3692 to 1.3632 before bouncing to 1.3692 in NY. Prices are supported by the UK’s COVID-19 vaccination record but hampered by talk that the EU may block additional shipments. EU and UK politicians are having another spat. The EU delayed a meeting with Britain’s new envoy because the EU wants to have full diplomatic status despite not being a sovereign nation.
USDJPY held on to its gains and traded in a 104.08-108.46 range. Domestic Retail trade data was not a factor, and neither were US 10-year Treasury yields, which fell to 1.00% from 1.03%
AUDUSD and NZD dropped heavily on the back of the risk-off shift but rebounded hard following the US GDP report. Both currencies remain above key support levels.
USDCAD soared to 1.2798 overnight on the back of widespread risk aversion sentiment. That changed after this morning’s US data and prices dropped to 1.2826. The domestic currencies continues to track US dollar sentiment while ignoring domestic influences.
USDCAD Technicals: The intraday USDCAD technicals are bullish while prices are above 1.2820, looking for a break above 1.2880 to extend gains to 1.2950. A break below 1.2820 targets 1.2770. The March downtrend line is intact below 1.3005. For today, USDCAD support is at 1.2820 and 1.2770. Resistance is at 1.2880 and 1.2940 Today’s Range 1.2770-1.2860
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank