June 24, 2020

USDCAD Open (6:00 am) 1.3564-68, Overnight Range: 1.3530-1.3582

• Rising US COVID-19 cases make traders skittish
• Treasury Secretary Mnuchin says government discussing more stimulus
• German IFO Business Climate jumps to 86.2 in June, strongest increase ever recorded
• US dollar opens with small losses vs majors- JPY and CHF unchanged

Percent change in US dollar since Thursday’s NY open

Source: Saxo Bank/IFXA

FX Recap and outlook: FX markets were rather tame in Asia, but activity picked up in Europe.  Risk sentiment was positive after a very robust German IFO Business Climate Survey, and the further easing of coronavirus lockdown restrictions in Europe and the UK.  However, enthusiasm was tempered by a surge in new COVID-19 cases in many US states.

Seven US states, including California, reported record-high numbers of hospitalizations.  Perhaps the numbers are a result of the belief by many American’s that the US constitution makes them immune to the virus, so wearing masks and social distancing is unnecessary.

President Trump appears to be trying to bolster his re-election hopes.  Bashing China, walling off the Mexican border, and slapping tariffs on friends and foes alike got him elected in 2016, and it appears he is using the same playbook for 2020.  The US is threatening new tariffs on Canadian aluminium, EUR olive, beer, trucks and other products, and UK gin.

Asia equity markets were mixed, following the lead of Wall Street.  The Nikkei closed close to flat while the Hang Seng was a tad higher.

European bourses are in the red, with the UK FTSE 100 down 2.21% and the German DAX index down 2.07% (as of 6.40 am ET)

S&P futures are also in negative territory.

The US dollar was mildly softer after US Treasury Secretary Mnuchin said the government is discussing another stimulus package.

EURUSD traded sideways in Asia then dropped from 1.1325 to 1.1270 in early European trading before quickly rebounding to 1.1300.   EURUSD consolidated yesterday’s gains with today’s German IFO Business Climate Survey (actual 86.2 vs 79.5 in May) providing some support on hopes for a faster economic rebound in Germany.

USDJPY dipped due to a whiff of safe-haven demand for yen

GBPUSD is trading close to the top of its 1.2467-1.2542 range.  Prices slid steadily in Asia and then accelerated lower in early Europe, only to bounce back aggressively.  On-going concerns around the EU/UK divorce may continue to limit gains.

USDJPY dropped in Asia, falling from 106.64 to 106.40.  The move was due to a whiff of safe-haven demand for yen because of the rise in US COVID-19 cases.

The Reserve Bank of New Zealand left rates unchanged, as expected but issued a somewhat dovish policy statement as risks were skewed to a weaker than expected outlook.  NZDUSD fell from 0.6512 to 0.6425 in part because the RBNZ discussed including foreign asset purchases.  AUDUSD dipped on mild risk-off sentiment.

USDCAD inched higher overnight, rising from 1.3530 to 1.3582.  Broad commodity currency bloc weakness, a dip in crude oil prices after API reported another increase in US crude inventories, and the US tariff threat on Canadian aluminium supported the gains.

The US data calendar is light, and the Canadian calendar is empty, leaving FX markets to look to equities for direction.

USDCAD Technicals:  The intraday USDCAD are bullish while prices are above 1.3510, looking for a break of 1.3615, the downtrend line from the end of May, to extend gains to 1.3790, the downtrend line from March 18.  For today, USDCAD support is at 1.3550 and 1.3510.  Resistance is at 1.3590 and 1.3620.  Today’s Range 1.3540-1.3620

Chart: USDCAD daily

Source:  Saxo Bank