Source: Pixabay
“Triple Witching Hour” -futures, stock index options, stock options expire
GBPUSD choppy due to weak data, Brexit hangovers, Delta variant
US dollar to close week with big gains
USDCAD open 1.2366-70, Overnight range 1.2341-1.2386, Previous close 1.2354
FX Week at a Glance
FX Recap and outlook
US dollar bears are licking their wounds or, in some cases, are dead and buried. After weeks after saying that rising inflation is transitory and nothing to fear, FOMC members turned tail. They projected two rate hikes in 2023, which are needed to tame transitory inflation.
The US dollar rallied and hasn’t looked back.
The major Asian equity indexes closed around flat but European bourses are under pressure. The UK FTSE 100 is down 1.47% and Germany’s DAX index has lost 1.34% (as of 5:30 am PT). S&P 500 futures suggest Wall Street will open deep in negative territory. 10-year US Treasury yields are 1.51%. Oil prices are down 1.1%, while gold prices give back earlier gains.
EURUSD closed at 1.1906, chopped around in a tight range than dropped to 1.1868 in NY trading. The single currency is suffering from the contrasting monetary policies between the ECB and the Fed. The ECB remains uber-dovish while the Fed turned hawkish, based on dot-plot projections. German PPI data was higher than expected, rising 7.2% y/y in May compared to 5.2% in April. The rebound was likely profit-taking as the short and medium-term technicals are bearish, targeting a test of 1.1835.
GBPUSD became agitated in Europe after a sedate Asia session. GBPUSD fell to 1.3857 from 1.3943 on weaker than expected UK Retail Sales data (-1.4% m/m in May vs forecast 1.6% m/m). GBPUSD sentiment is bearish to the rise in coronavirus Delta variant cases and trade tensions with the EU. The technicals outlook is bearish and looking for a test of support at 1.3750.
USDJPY chopped about in a 109.95-110.32 range. Traders appear to be ignoring the drop in 10-year Treasury yields. The Bank of Japan didn’t do anything to upset the apple cart. They left interest rates unchanged and extended its pandemic relief program.
AUDUSD and NZDUSD remained under pressure due to broad US dollar demand.
USDCAD gained 1.74% between Monday and today’s NY opening levels. It is a “middle of the pack” performance and better than its antipodean currency cousins, in part, because WTI oil prices are still above $70.00/barrel. The USDCAD rally is steep, looking tired, and vulnerable to a correction.
The US and Canadian economic calendars are empty.
USDCAD technical outlook
The intraday USDCAD technicals are bullish above 1.2350, looking for a test of downtrend line, and double top (April 27, and 28) resistance in the 1.2415-20 area. A break below 1.2350 targets 1.2320, and 1.2290. The daily Bollinger band and RSI studies show USDCAD is extremely overbought, and vulnerable to a correction. For today, USDCAD support is at 1.2340 and 1.2290 Resistance is at 1.2390 and 1.2420. Today’s range 1.2310–1.2390
Chart USDCAD daily
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank
