Source: Warner Bros

April 18, 2022

  • Trading very thin; markets closed in Europe and UK
  • China Q1 GDP and March Industrial Production beat expectations
  • US dollar opens bid due to risk aversion

FX change at a glance: Thurs-Monday open

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2635-39, Apr 15-18 range 1.2591-1.2642, Apr. 14 close 1.2603

USDCAD traded with a bid tone in those few markets that were open on Easter Monday, consolidating gains made on Thursday. The Loonie’s direction continues to be dictated by broad US dollar sentiment with traders ignoring domestic data and even Bank of Canada actions. USDCAD is trading like the BoC cut rates instead of raising them.

USDCAD is also supported by the surge in the 10-year US Treasury yield jumped to 2.866% from 2.658% Thursday morning. Hawkish comments by Fed officials suggesting the need for 0.50 bp rate hikes at the next few meetings in the wake of another dovish ECB policy meeting underpinned yields.

Oil prices consolidated gains from Thursday in a $106.04-$108.52 band. Concerns about the lower Chinese demand due to the latest COVID-19 outbreak were offset slightly by reports of supply disruptions from Libya. Bloomberg reports that US ally Saudi Arabia continues to work closely with Vladimir Putin and in a weekend, call agreed to leave production quotas unchanged.

USDCAD technical outlook  

The intraday USDCAD technicals are bullish above1.2590, which guards the March 30 uptrend line at 1.2540.  A break above 1.2681 (100 day moving average} extends gains to 1.2750. A break below 1.2590 targets 1.2540 then 1.2480.

For today, USDCAD support is at 1.2610 and 1.2570.  Resistance is at 1.2680 and 1.2750.  Today’s Range 1.2610-1.2680

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

It’s a slow Monday. Australia, New Zealand, most of Europe, and the UK markets enjoyed an extended long weekend thanks to the Easter Monday holidays. Those markets that were open were uninspiring.

Japan’s Nikkei 225 lost 1.06% due to the US interest rate outlook and a weaker yen. European bourses are closed. Wall Street futures are down but above their worst levels, while gold and oil prices are a tad higher.

FX markets are keeping a close eye on Russia’s invasion of Ukraine but are seemingly more worried about the risk of higher US interest rates.

EURUSD traded in a 1.0784-1.0830 range since Friday. Prices remain underwater following the ECB’s somewhat dovish monetary policy meeting. The ECB remains cautious as the economic slowdown that has been exacerbated by Russia’s invasion of Ukraine limits their ability to hike rates in the face of rising inflation. Meanwhile the prospect of US interest rates rising higher and faster risks driving EURUSD to 1.0500.

GBPUSD traded with a negative bias, falling from 1.3076 on Friday to 1.3008 today. GBPUSD is suffering from broad US dollar demand following comments from New York Fed President John Williamson Thursday. He suggested he is in favour of another 50 bp rate hike in May.

USDJPY rallied to 126.78 from 125.20 Thursday morning, coinciding with the sharp jump in US 10-year Treasury yields. Bank of Japan Governor Haruhiko Kuroda and Finance Minister Shunichi Suzuki expressed concern about the sharp FX moves, and prices slipped from the top. The BoJ continues to cap 10-year JGB yields at 0.25% while US 10-year Treasury yields climb.

AUDUSD and NZDUSD markets were closed but both currency pairs retreated in the face of broad US dollar demand. The minutes from the RBA meeting of the April 5 meeting are due tomorrow.

There are no US or Canadian economic reports of note today.

Chart: US 10 year Treasury yield

Source: Saxo Bank

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3763 (Previous Fix 6.3540

Shanghai Shenzhen CSI 300 fell 0.53% to 4,166.38

Q1 GDP 4.8% y/y, forecast 4.4%, Previous 4.0% y/y

March Industrial Production 5.0%, forecast 4.5%, previous 7.5%

Chart: China hourly, 1 month

Source: Yahoo Finance