USDCAD Open (6:00 am) 1.3908-12,   Overnight  Range: 1.3896-1.3959

  • Hope for quick COVID-19 vaccine fades, sapping positive risk sentiment
  • Canada inflation deflates
  • FOMC minutes release upstaged by Powell testimony yesterday
  • US dollar slips modestly against majors-NZD outperforms

Percent change in currency value against US dollar-NY close to NY open (6:00 am EDT)

Source: Saxo Bank/IFXA

FX Recap and outlook:  Canadian inflation data was a tick worse than forecast, which gave USDCAD a bit of support.  Most of the decline was due to falling energy prices. Statistics Canada said that Excluding energy, the CPI rose 1.6%.

Source:  Statistics Canada

FX traders unloaded some of their US dollars yesterday, and again overnight, as hope and prayer trade strategies gave way to reality. The retreat was due to differing opinions about the US economic outlook, expressed by Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell, yesterday. Mnuchin wants to wait and see the impact of the $3.0 trillion in fiscal stimulus, previously announced. Powell wants the government to spend more.  

Wall Street appears happy to ride a rollercoaster. Monday’s “miracle COVID-19 vaccine” hope rally gave way to pessimism yesterday and the Dow Jones Industrial Average (DJIA) gave back half of Monday’s gains.  Those losses may be recouped today, if current S&P futures gains, continue the rest of the day.

EURUSD consolidated yesterday’s gains in a 1.0920-1.0959 range. A break above the downtrend line resistance in the 1.0970-80 area would extend gains to 1.1140. News that Eurozone CPI rose 0.3% y/y rather than the 0.4% forecast helped to put a cap on upside gains. Fading euphoria around the Merkel/Macron corona bond plan due to perceived opposition from EU members and a reality check about a miracle COVID-19 vaccine, also limited gains.

GBPUSD traded higher in Asia but the rally stalled following news that April UK inflation fell -0.2%. The news wasn’t unexpected, but it shifted the conversation to the prospect of negative interest rates.

USDJPY is trading in New York at the bottom end of its 107.62-107.98 range, coinciding with a slide in US 10-year Treasury yields. The USDJPY technicals are bullish while prices are above 107.20, looking for a break above 108.10 to extend gains to 108.60.

NZDUSD was the best performing currency overnight, rising from 0.6065 to 0.6137 in early New York trading. Reserve Bank of New Zealand Governor put the kibosh to expectations for negative interest rates, at least for the next little while. AUDUSD followed Kiwi higher, supported by the easing of coronavirus lockdown restrictions.

Oil prices got additional support from yesterdays release of the American Petroleum Institute (API weekly crude stocks report which showed inventories declined by 4.8 million barrels last week.

USDCAD has been whippy. 

Prices were at 1.3965 Tuesday in Asia, and then 1.3866 yesterday afternoon in New York. The sell-off coincided with rising US equities. When Wall Street took a turn for the worse in the last hours of the day, USDCAD rallied, reaching 1.3959 in Asia. The reverse is true this morning. USDCAD dropped to 1.3881 in early NY trading as S&P futures rise 1.04%, and the US dollar eased.

Bank of Canada Deputy Governor Timothy Lane is speaking about “Policies for the Great Global Shutdown and Beyond” this afternoon.

USDCAD technical outlook

The intraday technicals are unchanged from yesterday.  USDCAD is bearish below 1.3950, looking for a break of support at 1.3830-60 to extend losses to 1.3710.  USDCAD has a gap on the daily chart between 1.3440-1.3480 from March 4.  It would act like a magnet if 1.3710 gives way.  The downtrend from the end of March is intact below 1.4100.  Support at 1.3850 has been tested multiple times since April 13.  If it continues to hold, a break above 1.3960 would extend gains to 1.4130.  For today, USDCAD support is at 1.3850 and 1.3810.  Resistance is at 1.3960 and 1.4005.  Today’s range 1.3850-1.3930

Chart: USDCAD 4 hour

Source: Saxo Bank