June 8, 2020

USDCAD Open (6:00 am ET) 1.3398-02, Overnight range 1.3394-1.3435

• FX markets mildly risk positive after China trade data, sentiment fading in NY
• Opec and friends meet expectations, underpinning crude prices
• Weak German Industrial Production data weighs on EURUSD
• Greenback grinding back overnight losses in early NY trading.

US Percent change in currency value

Source: Saxo Bank/IFXA

FX Recap and outlook:  A holiday in Australia ensured a quieter than usual start to this week’s FX session. Risk sentiment was mildly positive following Friday’s stellar US nonfarm payrolls report (actual 2.509 million vs forecast -8.0 million). The unemployment rate was reported as 13.3%. However, the Bureau of Labor Statistics admitted a “misclassification” error, which understated the result by 3.0%. No one cared, especially equity traders, who drove the NASDAQ to record intraday highs on Friday.

Opec and friends agreed to extend production cuts of 9.7 million barrels/day until August 1. Sunday, Saudi Arabia announced they were increasing prices of all grades of oil exported to Asia by $5.60-$7.30/b. US Shale producers are taking advantage of the higher prices and reopening wells, which may act as a brake on further oil price gains.

EURUSD traded sideways in Asia, rallied in Europe until weak German Industrial Production data, encouraged a bout of profit-taking, which drove prices to a 1.1270 low in NY trading. 

The EURUSD continues to be supported by last week’s ECB stimulus measures, EU plans for a COPVID-19 relief fund, and the reopening of Euro area economics. The technicals are bullish above 1.1140.

GBPUSD dropped 0.0090 points from its overnight peak of 1.2728 in early NY trading. There is not a specific catalyst for the selling pressure other than a much-needed easing of over-bought conditions. Traders may be encouraged to take profits ahead of Wednesday’s FOMC meeting. EU/UK trade talks are ongoing concerns. EU Chief negotiator Michel Barnier accused the UK of “backtracking “on key commitments” according to an article in euronews, Saturday.

USDJPY dropped from 109.68 to 109.27 in NY trading due to and a slight easing of positive risk sentiment. A decisive break below 109.30 could extend losses to 108.91. Prices are supported by US 10-year Treasury yields which climbed from 0.845% on Friday to 0.91% today. Japan’s Q1 GDP dropped 2.2% y/y.

AUDUSD rallied from the Asia open until mid-morning in Europe and then gave back most of the gains in early NY. Prices traded in a 0.6963-.0.7002 range. AUDUSD gains may be capped after Australia government officials said China is ignoring their calls to discuss trade issues.

USDCAD continued to consolidate last weeks losses in a 1.3394-1.3435 range overnight. Friday’s Labour Force Survey results were far better than expected. Instead of a loss of 500,000 jobs, Canada added 289,600. However, the results were not enough to drive USDCAD below support in the 1.3340-60 area because traders fear that Canada’s economic recovery will lag that of the other G-10 nations. The recovery in oil prices is not enough to jump-start the Canadian oil patch, which has been decimated by low prices and Federal government policies.

USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.3550, a level guarded by 200 day moving average resistance in the 1.3460 area. A break of long-term support at 1.3340 would lead to further losses to 1.3050. For today, USDCAD support is at 1.3390 and 1.3350. Resistance is at 1.3460 and 1.3490. Today’s Range 1.3390-1.3450

Chart: USDCAD 1 hour

Source:  Saxo Bank