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April 7, 2017

  • IMF raises  2021 global growth forecast to 6.0% from
  • US Trade deficits widens, Canada’s trade surplus increases
  • US dollar grinds higher except against EUR and CHF ahead of FOMC minutes

USDCAD open  1.2599-04,  Overnight Range 1.2565-1.2621, close 1.2569

FX at a Glance

Source: IFXA/RP

FX Recap and Outlook

The minutes from the March 17 FOMC meeting are released at 2:00 pm.   The upgraded forecasts in the Summary of Projections will have analysts looking for clues about the timing of the next Fed rate hike.

The major Asian equity indexes closed on a mixed note, and European bourses are trading flat to slightly lower. Wall Street Futures are unchanged.  WTI oil eked out small gains while Gold prices inched lower.  10-year US Treasury yields are trading at 1.661%.

The IMF upgraded Global growth to 6%.  US GDP growth was upgraded to 6.4% from January’s 5.1% forecast while warning of high uncertainty surrounding the global outlook.

Good news on the coronavirus vaccine front is offset by new, near-term COVID-19 restrictions in parts of Europe and  Canada.

President Biden plans to offer a vaccine to every American who wants one, by April 19.  At the same time, National Institute for  Health Director Anthony Fauci is concerned about a fourth-wave outbreak.  Closer to home, residents in the Greater Toronto Area face new stay-at-home orders, the shutdown of most retail and schools, and the risk of a curfew.

The US Trade deficit widened to $71.1 billion from $67.8 billion in January due to exports falling more than imports.

EURUSD is trading with a bid in a narrow range,  rising from 1.1865 to 1.1898.  Prices are supported by better than expected final readings for March Composite and Services PMI data.  EURUSD gains above 1.1920 may be difficult especially if the FOMC minutes suggest the risk for higher US rates sooner than what is expected.  The intraday EURUSD technicals are bullish above 1.1850.

GBPUSD dropped from 1.3828 to 1.3774 when Europe opened, than bounced to 1.3838 in early NY trading. A slightly weaker than expected Composite PMI was ignored as the results were still at a seven-month peak.  Prices are supported by the UK government’s plans to lift coronavirus restrictions.  The intraday technicals are bullish above 1.3780, looking for a break above 1.3860 for a retest of 1.3920.

USDJPY is weighed down by the slide in 10-year Treasury yields, which have dropped from 1.722% on Monday to 1.661% this morning.  Prices continued  to consolidate yesterday’s losses in a 109.74-109.93 range.  A mild bout of risk aversion is contributing to USDJPY sales.

AUDUSD and NZDUSD retreated due to broad US dollar demand.  AUDUSD has a bullish bias as long as prices remain above 0.7610.  Traders are awaiting further direction from the FOMC minutes.

USDCAD rallied on the back of broad US dollar demand and a drop in oil prices.  WTI oil fell to $58.74 in Asia before recovering to $59.80 in NY.  The IMF raised the 2021 Canada GDP growth forecast to 5.0% from 3.6% in their January report.

Canada Merchandise Trade surplus was $1.04 billion, almost bang-on the  forecast. January’s result was downgraded to $1.2 billion from $1.4 billion.  USDCAD jumped to 1.2621 from 1.2595 on the news.

FX markets are likely to be jittery until the FOMC minutes are released.

USDCAD Technicals

The intraday USDCAD technicals are bullish above 1.2560 looking for a test of resistance in the 1.2630-50 area. A break above 1.2650 targets 1.2760, while a move below 1.2560 targets 1.2510.   For today, USDCAD support is at 1.2560 and 1.2510.  Resistance is 1.2630 and 1.2650.  Today’s Range 1.2530-1.2630

Chart: USDCAD 1 hour.

Source:  Saxo Bank

FX open, high, low, and previous close

Source: Saxo Bank