Source: IFXA Ltd/RP
FX Recap and Outlook: The US dollar is giving back recent gains in an uneventful market.
China returned from their week-long Lunar New Year holiday and bought stocks. The rally was short-lived, and the Shanghai Shenzhen CSI 300 index closed with a small loss. The other major Asian indexes were modestly lower, accept Australia’s ASX200, which was unchanged. European stocks are down across the board, and US equity futures are in the red.
US 10-year equity futures dropped from their overnight peak of 1.31% to 1.282% in NY, in part because yesterday’s FOMC minutes underscored the cautious sentiment repeated by numerous Fed officials, including Chair Powell. The policymakers believe that inflation increases will be temporary as the unemployment level is higher than the data suggests.
EURUSD is rebounding from yesterday’s sell-off, which took the single currency to a low of 1.2023. Prices are pressing against minor downtrend line resistance at 1.2075, which if broken, will extend gains to 1.2150. The minutes from the ECB monetary policy meeting were a non-event. They reminded traders that the central bank will maintain its very accommodative monetary policy stance. The ECB sees growth risks to the downside.
GBPUSD climbed steadily, rising from 1.3841 in Asia to 1.3955 in NY. The currency pair continues to benefit from the pace of UK vaccines. Prices are also supported by sales of EURGBP. Bank of England policymaker Michael Saunders is concerned that rising unemployment will jeopardize the recovery.
USDJPY dropped alongside the drop in US Treasury yields and because of the FOMC minutes re-confirming the Fed’s dovish outlook. A decisive breach of support at 105.40 would extend losses to 105.10.
AUDUSD traded with a bit of a bid overnight while ignoring employment data. Australia added 29,1000 jobs following a 50,000 increase last month. The unemployment rate dipped to 6.4% from 6.6%.
AUDUSD and NZDUSD continue to ebb and flow with the prevailing global economic recovery story.
WTI oil prices jumped to $62.23/barrel overnight, supported by the US supply disruption caused by a winter storm. Prices are also underpinned by hopes for a global economic boom and by existing Opec production cuts.
USDCAD traded lower with the improved risk sentiment tone. Higher crude prices didn’t hurt either. Traders ignored yesterday’s inflation report. CPI rose 1.0% y/y which is still well-below the BoC target of 2.0%
US weekly Jobless claims, Housing starts building permits and Philadelphia Fed Manufacturing Survey data are due today. Robust data will support the view that the US economy will outperform that of its peers.
USDCAD Technicals: Yesterday USDCAD broke above the February downtrend line at 1.2730 but the move was not sustained, leaving the bearish outlook intact below 1.2720 .A breech of minor support at 1.2650 targets 1.2610 then 1.2550. For today, USDCAD support is at 1.2660 and 1.2610. Resistance is at 1.2720 and 1.2770. Todays Range 1.2640-1.2720
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank