Source: Pixabay

July 22, 2021

ECB lives up to dovish expectations-Press Conference ongoing

Weekly Jobless claims rise higher than expected

Oil prices rebound and undermine USDCAD

USDCAD open 1.2558-62, Overnight range, 1.2541-1.2589,  Previous close 1.2562

FX at a Glance-24 hours

Source: IFXA/RP

FX Recap and outlook

The US dollar started the NY session on the defensive.  European equity indexes traded higher and added to those gains after the dovish ECB statement.  Oil prices are higher while gold prices slumped.  US 10-year Treasury yields are steady at 1.29%.  Wall Street is poised to open flat.

Weekly jobless claims climbed 51,000 to 419,000 in the week ending July 17, and the previous result was revised 8,000 higher.

The ECB policy statement was widely expected to be dovish.  It was, but not overly so.  The statement said:  “In support of its symmetric two per cent inflation target and in line with its monetary policy strategy, the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon

EURUSD dipsy-doodle between 1.1772 and 1.1790 following the announcement and ahead of the ECB press conference. The EURUSD technicals are bearish below 1.1850.

GBPUSD touched 1.3779 around the ECB statement, after climbing from an Asia low of 1.3692.  Prices were supported by improved risk sentiment, and the ending of UK COVID-19 restrictions.  Bank of England Deputy Governor Ben Broadbent said that inflation increases are temporary,  Analyst interpret his remarks to mean that the Bank will not  reduce stimulus anytime soon.  The intraday GBPUSD technicals are bullish above 1.3720, looking for a break above 1.3800 to extend the rally.

USDJPY dropped from its NY peak of 110.34 to the Asia low of 110.04, coinciding with US 10-year Treasury yields from 1.235% sliding from 1.295% to 1.272%

USDCAD plunged from 1.2805 on Monday morning to 1.2530 yesterday and consolidated those losses in a 1.2555-1.2588 range overnight.  The rebound in WTI oil prices from $64.98 on Tuesday to $71.13 today, and the improved risk tone fueled the move.

USDCAD traded in a 1.2000-1.3750 range for the past six years, except for 17 weeks when it traded above the top.  The first time was due to the oil price plunge when Saudi Arabia sparked an Opec price war.  The second time was due to COVID-19.  Arguably, at 1.2550, USDCAD has far more upside than downside.

US fiscal stimulus, combined with a more hawkish than expected FOMC outlook suggests the US dollar will continue to outperform against the G-10 majors, which should limit USDCAD downside.

USDCAD technical outlook

There  intraday USDCAD technicals are bearish below 1.2620 looking for a break below 1.2540 to extend losses to 1.2480.  A move above 1.2620 targets 1.2660.  For today, USDCAD support is at 1.2540 and 1.2490.  Resistance is at 1.2620 and 1.2660.   Today’s range 1.2520-1.2620.

Chart USDCAD weekly

Source: Saxo Bank

FX open, high, low, previous close