March 24, 2021

USDCAD open (6:00 am ET) 1.2567-71,  Overnight Range 1.2567-1.2607,  Close 1.2588

FX Ranges at a Glance 

Source: IFXA Ltd/RP

FX Recap and Outlook: 

The end of Q1 2021 is still a week away, but fixed income and equity rebalancing flows may already be in play.  A host of issues around the globe, including North Korea renewing missile tests, COVID-19 lockdown extensions in parts of Europe, a container ship aground, blocking traffic in the Suez Canal, China tensions with major G-10 countries, and talk of possible tax hikes in the US, are unnerving traders.

Asia equity indexes followed the lead from Wall Street and closed with hefty losses, except Australia’s ASX 200 index, which rose 0.49%.  The major European bourses are down but off their worst levels, while S&P 500 Futures are modestly higher.  WTI oil prices recovered 50% of Tuesday’s losses, and Gold is a tad firmer compared to its closing level of $1724.08.  US 10 year treasury yields are unchanged at 1.62%.

Fed Chair Jerome Powell and Treasury Secretary Janet Yellen’s testimony to Congress was merely a rehash of the monetary policy statement and previous remarks by both.  Nothing to see, nothing new.

US Durable Goods Orders fell 1.1% in February, well below January’s 3.4% increase.  The drop was the first decline since last April and was likely due to lousy weather in February in large parts of the country.  FX markets ignored the results.

EURUSD extended yesterday’s drop from 1.1944 and touched 1.1813.  The break of double-bottom support from March 8 at 1.1840 opens the door to a test of  1.1750. The single currency is weighed down by third-wave pandemic lockdown restrictions in some regions suggesting that a Eurozone economic rebound will seriously lag behind the US.  Traders largely ignored good news in the form of better than expected eurozone PMI data.

March Composite PMI  rose to 52.5% from 48.8%  m/m previously and are now in expansion territory.  German PMI data beat expectations and was already in expansion territory.

GBPUSD dropped from 1.3756 to 1.3676, then rebounded sharply, climbing to 1.3730 in early NY trading. Prices suffered technicals which turned bearish with yesterday’s breach of the 1.3800 level. UK inflation data missed forecasts, but ING economists say the trend is higher due to base effects and higher energy prices.  UK PMI data was better than expected.

USDJPY traded in a 108.46-108.75 range as soft US Treasury yields and mild risk aversion sentiment weighed on prices.  The Bank of Japan monetary policy minutes showed one member suggesting closer scrutiny of the side-effects of easy policy.

AUDUSD has bounced back to 0.7615 in NY after falling from 0.7633 to 0.7585 overnight. Traders ignored modestly better PMI data as price action was driven by US dollar sentiment.  NZDUSD tracked AUDUSD.

WTI oil prices rallied from $57.34 to $59.72, then dropped to $58.96 in NY.  Fear that the third-wave pandemic is delaying a global economic recovery,  and a 2.9 million barrel increase in US crude inventories, combined with escalating tensions between China and many major G-10 countries, drove prices lower.  The rally was sparked by news a container ship ran aground in the Suez Canal, which is blocking oil shipments.

USDCAD bounced in a 1.2567-1.2607 range, with the dip sparked by the crude rally.   BoC Governor Toni Gravelle hinted at QE tapering in his speech yesterday. USDCAD direction continues to be determined by broad US dollar sentiment, and at the moment, the greenback is in demand.

Fed Chair Powell’s second day of Congressional testimony is today.

USDCAD Technicals:  The intraday technicals  are bullish while trading above 1.2550 but need to break resistance in the 1.2610 area to provide a serious test of the March 2020 downtrend line in the 1.2630 area.   For today, support is at 1.2550 and 1.2510. Resistance is at 1.2610 and 1.2630. Todays Range 1.2540-1.2610

Chart: USDCAD 4 hour

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank