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May 11, 2021

NASDAQ plunge sinks global equities

China threatening Australian LNG shipments

US dollar opens modestly lower, CHF, JPY unchanged

USDCAD open 1.2119-24,  Overnight Range 1.2096-1.2131, close 1.2131

FX at a Glance

FX Recap and Outlook

The major Asia equity indexes took it on the chin after the NASDAQ closed down 2.55%.  A combination of concerns about rising interest rates, high valuations, and regulatory risk weighed on prices.  Japan’s Nikkei 225 closed down 3.06% as it had additional concerns about the government imposing a national state of emergency due to COVID-19.  Australia’s ASX 200 fell 1.06%.  European bourses are deep in the red, with the UK FTSE 100 and German Dax down 2.0% at the time of writing.  S&P 500 futures are down 0.64%., gold prices are flat, and crude is lower.  10-year Treasury yields ticked higher and are 1.617%.

EURUSD traded quietly in Asia, then rallied from 1.2124 to 1.2168 into the NY open.  Record high levels for German Eurozone ZEW Confidence data underpinned the single currency. Eurozone ZEW Economic Sentiment was 84 compared to 66.3 previously, while German Economic Sentiment was 84.4 from 70.7. EURUSD remains bullish above 1.2040, looking for a break above 1.2180 to extend gains to 1.2240.

GBPUSD is consolidating gains after breaking above resistance at 1.4010 yesterday.  Prices traded in a 1.4105-1.4147 range overnight, basking in the glow of recent election results.  The Scottish National Party failed to secure a majority which some analysts suggest diminishes the risk of a Scottish Independence referendum.  However, they only lost by one seat.  UK BRC Retail Sales rose 39.6% y/y in April compared to 20.3% y/y in March.  GBPUSD is expected to range in a 1.4010-1.4240 band.

USDJPY drifted in a 108.67-108.97 range. Mild risk aversion sentiment because of the equity market rout was offset by rising 10-year Treasury yields, which climbed to 1.617% from 1.561% yesterday. The Bank of Japan summary of Opinions said the economy was picking up, but COVID-19 risks remained.

AUDUSD consolidated yesterday’s losses in Asia the rose from 0.7823 to 0.7852 in Europe.  China is continuing its trade harassment of Australia. Beijing reportedly told two smaller LNG importers not to buy from Australia. Traders are also looking ahead to tomorrow’s Australian budget.

USDCAD is trading at the top of its overnight 1.2090-1.2112 range, with prices supported by softer commodity prices and modestly bearish risk sentiment.  USDCAD dropped 4.5% since April 21, which appears a tad excessive and leaves the currency pair vulnerable to a corrective rally, especially if commodity prices give back some recent gains.

There are no notable US or Canadian economic reports due today, leaving FX direction to be determined by Wall Street.

USDCAD Technical Outlook

The  intraday USDCAD technicals are bearish below 1.2160, which guards the longer term downtrend line 1.2230.  However, Bollinger Bands and RSI studies suggest USDCAD is oversold and vulnerable to corrective rally to the 1.2190-1.2230 area. For today, USDCAD support is 1.2090  and 1.2050  Resistance is at 1.2130 and 1.2190.  Today’s Range 1.2080-1.2130

Chart: USDCAD daily

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank