Photo: IFXA Ltd

March 23, 2021

USDCAD open (6:00 am ET) 1.2582-86,  Overnight Range 1.2521-1.2584,  Close 1.2523

FX Ranges at a Glance 

Source: IFXA Ltd/RP

FX Recap and Outlook:  There was a lot of news overnight and FX traders didn’t like any of it.

The US, Canada, EU, and the UK  imposed sanctions on Chinese officials to express dismay over China’s treatment of Uyghur Muslims.  The sanctions have all the bite of a gummy bear, but traders were spooked due as they are a further sign that the US and China’s relationship continues to deteriorate.

The Biden administration is reportedly devising another spending plan, which includes and infrastructure and economic plan.  The $3.0 trillion expense is still early in the hallucination stage, but even so, traders were more concerned about how it would be funded than any potential economic boost.

Fed Chair Jerome Powell will tell Congress today that “ the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”  The text of his opening remarks was released yesterday afternoon.

EURUSD reversed yesterday’s gains abruptly, falling from 1.1940 to 1.1886 in early NY trading. The single currency suffered from a wave of bearish sentiment, which included the latest lockdown measures in many parts of Europe.

German Chancellor Angela Merkel said the country was “in a new pandemic.”  Sentiment remained negative over the Eurozone underperformance in the COVID-19 vaccine sweepstakes, a dovish ECB, geopolitical tensions, and bearish technicals.  Traders are looking for a break below 1.1840 to target 1.1750.

USDJPY  is just above the low of its 108.42-108.86 overnight range. A drop in 10-year Treasury yields from 1.682% to 1.631% in NY is weighing on prices.  In addition, Japanese investors have reportedly curtailed activity ahead of their March 31 year-end.

GBPUSD dropped to 1.3753  from 1.3863 on the back of broad US dollar strength.  Part of GBPUSD weakness can be blamed on the evaporation of positive sentiment around the UK’s COVID-19 vaccination program and the shift in focus to the economic outlook. GBPUSD is not getting any benefit from today’s employment report, which showed a better-than-expected unemployment rate of 5.0% (3 month average to January) compared to a forecast of 5.2%.  However, analysts believe the unemployment level will rise due to the ending of employment support programs.  The GBPUSD technicals suggest the currency pair is oversold.

AUDUSD and NZDUSD  were hammered due to broad US dollar strength, falling commodity prices,  and concerns around the latest sanctions on China.  The NZDUSD drop was exacerbated by the governments plan to stem the steep rise in housing prices .  They announced a $3.2 billion program to help first-time buyers while planning measures to reduce speculation.  NZDUSD dropped to 0.7026 from 0.7164.

Oil prices are getting spanked.  WTI oil fell 4.5%, from $61.32/barrel at yesterday’s close to $58.50 today before inching higher.   US/China tensions and the latest coronavirus outbreaks in Europe have raised concerns that crude demand may be less robust than expected.

USDCAD rallied from 1.2521 to 1.2584 overnight, then extended the gains to 1.2593 in early NY trading.  Prices are supported by broad US dollar demand, falling oil prices and bullish technicals following the break above 1.2550.  Today’s BoC Deputy Governor Toni Gravelle speech titled “The role of the Bank of Canada in responding to market-wide stress” many get more attention  than usual in light of the NZ governments housing concerns.  Canada has similar issues in the main cities.

US New Home Sales data is on tap, as well as speeches from Atalanta Fed President Raphael Bostic and St Louis Fed President James Bullard.

USDCAD Technicals:  The intraday technicals  are bullish while trading above 1.2505.  Bullish sentiment is  supported by the break above resistance in the 1.2540-50 area, targeting 1.2830, which is the downtrend line from the COVID-19 peak of 1.4650   For today, support is at 1.2530 and 1.2500. Resistance is at 1.2605 and 1.2640. Todays Range 1.2540-1.2630

Chart: USDCAD daily

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank