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June 27, 2020

USDCAD Open (6:00 am) 1.3655-59, Overnight Range: 1.3650-1.3697

  • FX markets cautious after US COVID-19 cases surge.
  • FOMC minutes, Fed Powell testimony Wednesday
  • US dollar recoups some of Friday’s losses as of NY open

Percent change in US dollar since Monday’s NY open

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Source: Saxo Bank/IFXA

FX Recap and outlook:  It is going to be a short week.  Canada is closed on July 1st for Canada Day, while American’s get a long weekend, starting Friday for Independence Day.  FX traders won’t have much incentive to get involved until Wednesday.

Fed Chair Powell’s semi-annual testimony to Congress and the minutes from the June 10th FOMC meeting are due that day.

The number of new COVID-19 cases in the US accelerated.  The Washington Post reported 242,369 new US coronavirus cases since June 23rd.  The question is “Is this the second wave, or just a continuation of wave 1?”

EURUSD drifted higher overnight, rising from 1.1219 to 1.1280 in NY.  The single currency climbed on news that Germany’s parliament approved stimulus measures including a VAT cut, and a better than expected Eurozone Business Climate Index for June (actual -2.26 vs forecast -3.91).  The short term technicals favour further gains toward 1.1450, while prices are above 1.1170.

GBPUSD traded in a 1.2316-88 range and is just above its session lows in NY.  Sentiment is bearish as the EU/UK trade talks resume.

Apparently, UK PM told the Polish Prime Minister that he would accept an Australia-style trade deal, which is close to a “no-deal” Brexit.

USDJPY traded in a narrow range, undermined by a drop in US Treasury yields and concerns about surging coronavirus cases in the US.  The short term technicals are bearish while prices are below 107.50, looking for a break of support at 107.05 to extend losses to 106.00

USDCAD traders will bide their time until Friday’s nonfarm payroll data is released.

AUDUSD and NZDUSD traded sideways until EURUSD popped, just before NY opened.  The antipodeans are content to track broad US dollar moves while awaiting the Powell show on Wednesday.

Oil prices recouped Friday’s losses.  The rally is a correction in the context of the downtrend that started last week with the break below $39.80/barrel if prices stay below $39.10/b.

USDCAD rallied to 1.3714 on Friday, ahead of the 11:00 am ET fix, which suggests some pre-month-end demand for US dollars.  The S&P 500 is down 1.16% Month-to-date, as of June 26th, which suggests USDCAD demand by portfolio managers. However, prices quickly retreated and snapped the nascent uptrend and leaving the downtrend line from March (daily chart) intact.

Today’s Canadian data includes Raw Material Prices and Industrial Product Prices.  US releases Pending Home Sales.

USDCAD Technicals:  The intraday USDCAD are bullish above 1.3630, looking for a break above 1.3720 to extend gains to 1.3860.  A break below 1.3630 shifts the focus to 1.3570 support.  For today, USDCAD support is at 1.3630 and 1.3570.  Resistance is at 1.3720 and 1.3780.  Today’s Range 1.3630-1.3720

Chart: USDCAD daily

Source:  Saxo Bank