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January 20, 2021

  • Risk sentiment improves as Trump slinks away
  • Bank of Canada monetary policy meeting will be non-event
  • US dollar slides for third day

USDCAD open (6:00 am ET) 1.2694-98,  Overnight Range 1.2693-1.2737, Previous Close 1.2732

FX Ranges at a Glance:

Source: IFXA Ltd/RP

FX Recap and Outlook:  “Don’t worry-be happy” is the theme of the day.  Joe Biden will be inaugurated as the 46th President of the United States, in front of  25,000 of his closest, heavily armed  National Guard friends.  Members of the public are told to stay indoors and watch the event on TV.

Asia equity indexes closed with solid gains, except for those in Japan, which were weighed down by USDJPY moves.  European bourses and S&P futures are higher, as are oil and gold prices.

GBPUSD is the big mover, rising from 1.3633 to 1.3717, in part because of selling of EURGBP, which broke support at 0.8860.  UK inflation rose 0.3%m/m in December compared to forecasts for a 0.2% increase.  Some analysts suggest the result reduces the risk of negative interest rates, which underpinned GBPUSD.

EURUSD is weighed down by EURGBP selling pressures, which left the single currency opening in NY at the bottom of its 1.2097-1.2157 range.   Eurozone HICP inflation was unchanged at 0.3%.  Traders are biding their time until tomorrow’s ECB monetary policy meeting.

USDJPY traded sideways in a 103.73-103.92 range, trading with a negative bias because of broad US dollar weakness.   The two-day Bank of Japan monetary policy meeting starts today.  Some analysts expect them to reduce their growth outlook due to the latest round of coronavirus cases.

AUDUSD and NZDUSD gains were fueled by higher commodity prices and broad US dollar weakness due to US stimulus expectations.

USDCAD dropped from 1.2737 to 1.2693 as prices mirrored the antipodean currency rally.  The Bank of Canada is n expected to leave interest rates, and quantitative easing purchases unchanged at today’s policy meeting.  They may tweak their short-term forecasts due to the latest efforts to contain the spread of COVID-19 in many regions. 

Canada December inflation was a weaker than expected decline of 0.2% m/m.  Analysts expected 0.% compared to the 0.1% reading in November.  The currency did not react to the news.

FX traders will be cautious today ahead of Joe Biden’s inauguration speech.

USDCAD Technicals:   The intraday technicals are bearish below 1.2730, looking for a break of minor support at 1.2670 to extend losses to 1.2630.  A break above 1.2730 suggests a retest of resistance at 1.2790.  The longer term trend is down, with  1.2500 as the target. For today, USDCAD support is at 1.2670 and 1.2640.  Resistance is at  1.2740 and 1.2790. Today’s Range 1.2650-1.2740

Chart: USDCAD 4 hour

  Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank