Modest risk aversion fear ripples through FX markets
Canada April GDP is better than expected, but still weak
Canadian dollar to end H1 2021 as best performing G-10 major currency vs US dollar
USDCAD open 1.2402-06, Overnight range 1.2370-1.2422, Previous close 1.2401
Year-to-date FX at a Glance
FX Recap and outlook
There is a ripple of risk aversion in FX markets, a note of caution in global equities, and resignation around reflation trades. Who would have guessed that the country with the fastest rising deficit among developed nations since the start of the pandemic would also have the best performing currency against the US dollar since the start of the year? The Canadian dollar is the currency equivalent of a meme stock.
Canada April GDP came in better than expected, shrinking just 0.3% m/m rather than the 0.8% decline expected. Also, Industrial Product and Raw Materials Price indexes were higher than in April. The data was ignored.
US ADP Employment rose 692,000 in June, better than expected but worse than May’s downwardly revised 886,000 result
The data did not have and impact on S&P 500 futures which are indicating a flat to modestly negative open for Wall Street. US 10-year Treasury yields have consolidated overnight losses in the 1.46% area. The major European equity indexes are down.
EURUSD is hovering around the bottom of its overnight 1.1877-1.1908 range, with bearish intraday technicals overshadowing a better than expected German unemployment report. EURUSD technicals are looking for a test of 1.1770 on a break of 1.1840.
GBPUSD is in the middle of its choppy 1.3817-1.3872 overnight range. Shrinking UK Q1 GDP (actual 1.6% q/q, vs forecast 1.5%) and rising delta-variant coronavirus cases in the UK are a drag on GBPUSD gains.
The Bank for International Settlements said an inflation spike could raise the UK’s cost of borrowing to post-war highs. It wouldn’t be any different for Canada, where total federal and provincial debt is close to 100% of GDP.
USDJPY traded in a 110.43-110.67 band. Falling US Treasury yields, and modest risk aversion sentiment weighed on prices.
AUDUSD dropped from 0.7523 to 0.7498 in reaction to the Government imposition of lockdown measures across the country due to a nasty delta-variant coronavirus outbreak. Softer commodity prices also undermined prices.
USDCAD gave back overnight gains in early NY trading, in part because the US dollar gave back some of its gains against G-10 majors. The currency pair direction is at the mercy of broad US dollar sentiment.
Happy Canada Day tomorrow. The AgilityForex update will not be published.
USDCAD technical outlook
The intraday USDCAD technicals are bullish above 1.2380, but upside momentum stalled at 1.2420. A break below 1.2380 targets 1.2320which if broken will extend losses to 1.2280. . For today, USDCAD support is at 1.2380 and 1.2420. Resistance is at 1.2400 and 1.2450. Today’s range 1.2320-1.2410.
Chart USDCAD 4 hour
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank