Wall Street closed Friday on a positive note. That sentiment didn’t cross the Pacific Ocean into Asia. The Nikkei’s 2.32% fall, led the other major Asia indices lower, except for the Shanghai CSI 300. European equity traders weren’t all that bothered and all the major indices posted gains, led by a 1.88% rise in the DAX.
Rebounding equity prices turned risk sentiment positive, and the US dollar retreated against the majors, except for the Swiss franc and British pound. Those currencies had to contend with domestic issues.
The Swiss franc lost ground after January CPI dropped to 0.7% y/y. (forecast 0.8%), y/y, GBPUSD sank after comments from a Bank of England official saying there is “no rush” to raise rates. Brexit concerns are another factor undermining the currency when the EU Chief negotiator said that a transition deal is not a given.
EURUSD traded quietly in Asia and then ticked higher during the European session, rising from 1.2245 to 1.2296 before inching down to 1.2266 at the New York open. ECB member Nowotny continues to fan the flames of currency manipulation by the US. Reuters reported that Mr Nowotny said “We in the ECB are certainly concerned about attempts by the United States to politically influence the exchange rate,”
USDJPY traded sideways in a 1098.52-108.92 range, supported by a rise in US Treasury yields. Volumes were low due a Japanese National holiday.
The antipodean currencies consolidated earlier gains supported by the improved risk outlook and broad US dollar weakness.
Oil traders breathed a sigh of relief when equity markets stabilised. WTI rebounded from an opening low of $59.14 to hit $60.80 before profit-taking drove prices back to 60.37.
USDCAD appeared to be a reluctant participant in the overnight US dollar sell-off. Friday’s ugly headline employment number, last week’s steep drop in oil prices and the NAFTA negotiations underpinned the currency pair in the 1.2550 area.
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish while prices are trading above 1.2550. Friday’s spike to 1.2685 was an anomaly, yet reinforces the topside vulnerability. A break above 1.2630 will target 1.2720-50 area. For today, USDCAD support is at 1..2550 and 1.2510. Resistance is at 1.2590 and 1.2630.
Today’s Range 1.2550-1.2630