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June 26, 2020

USDCAD Open (6:00 am) 1.3650-54, Overnight Range: 1.3630-61

• US COVID-19 rebound ignored by global equity traders
• ECB President Lagarde says worst of coronavirus economic crisis is likely over
• Canadian dollar poised to end the week as the weakest currency vs USD, CHF the strongest

Percent change in US dollar since Monday’s NY open

Source: Saxo Bank/IFXA

FX Recap and outlook:  FX markets were an oasis of calm overnight, a nice reprieve from the turmoil earlier this week. White House Advisor Peter Navarro caused a kerfuffle in Asia Tuesday after he declared the US/China Phase 1 trade deal was over.  The panic buying of US dollars and selling of stocks ended as quickly as it started after President Trump tweeted that Navarro was an idiot and shouldn’t have said what he said.  Ok, that’s not true.  Trump wrote: “The China Trade Deal is fully intact.  Hopefully, they will continue to live up to the terms of the Agreement!”

Navarro and economic data were merely sideshows to COVID-19 developments that were the main attractions.

Reports of a record number of new COVID-19 cases (39,327 0n Thursday) sparked safe-haven demand for JPY, CHF, and USD.  Wall Street sank on Wednesday but recouped almost half of the losses on Thursday.

Overnight, Asia equity indexes closed with gains.  In Europe, Germany’s DAX and the UK’s FTSE 100 are up over 1.1%, while S&P and DJIA futures are flat. Gold prices (XAUUSD) ticked higher overnight with the resurgence in COVID-19 cases underpinning prices all week.

Risk sentiment is negative after the spike in coronavirus cases forced many US states to pause their reopening plans, including Texas, and Florida.

EURUSD is trading near the top of its narrow overnight range of 1.1306-1.1338.  The single currency is directionless inside a borader1.1140-1.1360 band.  ECB President Christine Lagarde said “We probably have passed the lowest point.  I say that with some trepidation because of course there could a severe second wave if we learn anything from the Spanish Flu,”

USDCAD was the best performing G-10 currency pair overnight, and this week.

GBPUSD traded in a 1.2377-1.2436 band, garnering a modicum of support with the start of new EU/UK trade talks on Monday.

USDJPY is trading at the bottom of its overnight, 106.87-107.23 range.  Safe-have demand for yen due to the resurgence of US COVID-19 cases and slightly softer US Treasury yields undermined prices.

AUDUSD and NZDUSD are finishing the week well below their peak levels seen on Tuesday.  Mild negative risk sentiment and soft commodity prices are weighing on the currency pair.

USDCAD was the best performing G-10 currency pair overnight, and this week.  In addition to the broad US dollar demand from renewed risk aversion sentiment, USDCAD is underpinned by the retreat in WTI oil prices, and by the Fitch Ratings Inc downgrade of Canada’s debt.

The US Michigan Consumer Sentiment index and PCE data are on tap today. Month-end and quarter-end portfolio rebalancing flows may start to disrupt FX markets today.

USDCAD Technicals:  The intraday USDCAD are bullish while prices are above the hourly uptrend line at 1.3620 looking for a break of resistance in the 1.3670-80 area.  A break below 1.3620 would extend losses to 1.3520.  A break above 1.3680 targets 1.3860. For today, USDCAD support is at 1.3620 and 1.3570.  Resistance is at 1.3680 and 1.3730.  Today’s Range 1.3610-1.3580

Chart: USDCAD 4 hour

Source:  Saxo Bank