Source: Saxo Bank
Gold drops 4.5% in early Asia, bounces 3.5% nearly as fast
Global risk tone is cautious, Fed-speakers may talk tapering
US steady, hangs on to post NFP gains
USDCAD open 1.2543-47, Overnight Range 1.2544-1.2582, Previous close 1.2552
FX at a Glance:
USDCAD is underpinned by the mix of weaker than expected Canadian and stronger than forecast US employment reports from Friday, combined with a 3.4% plunge in WTI oil prices overnight. Friday’s Canadian employment report may have missed forecasts, but the results were still solid as it recorded 83,000 in new full-time jobs.
It was overshadowed by the even better US nonfarm payrolls data, which analyst suggest ticks the box for Powell’s “substantial further progress.” That means traders will pay attention to this weeks Fed speakers for hints that QE tapering may happen sooner than expected.
Oil prices tumbled due to concerns that the global economic recovery may stall due to spreading coronavirus cases in Asia. News China’s exports and imports fell and the flash crash in gold exacerbated the decline.
Technical view: The USDCAD technicals are bullish above 1.2450, looking for a break above 1.2605 to extend gains to 1.2730. A break below 1.2450 targets 1.2400. For today, USDCAD support is at 1.2510 and 1.2470. Resistance is at 1.2570 and 1.2605. Today’s range 1.2510-1.2570
Chart USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
The overnight session started with gold prices falling off a cliff. The XAUUSD “flash crash” dropped the shiny metal from $1763.86 at Friday’s close to $1684.71 at the start of the Asia session. Market holidays in Japan and Singapore enabled stop losses in the $1750 area to trigger, and the exceedingly poor liquidity conditions exacerbated the free-fall. Opportunistic buyers emerged, and prices rebounded to $1740.00.
The free fall in gold, weak oil prices, soft China trade data, and chatter that Friday’s US employment data would force the Fed to begin QE tapering ahead of schedule but equity traders on the defensive. The major European bourses are flat to slightly lower, Wall Street futures are modestly in the red, and US 10-year Treasury yields dipped to 1.277% from 1.305%.
EURUSD dipped to session lows in early Asia, touching 1.1743 before grinding higher to 1.1763 by the NY open. The single currency is consolidating losses following the US employment data and has a negative outlook due to divergent ECB and Fed monetary policies.
The EURUSD technicals are bearish while prices are below 1.1870, looking for a break below 1.1740 to extend losses to 1.1600.
GBPUSD is rangebound inside a 1.3840-1.3980 band, as prices consolidate Friday’s post NFP losses.
GBPUSD continues to be underpinned by the UK economic recovery and speculation that the BoE will need to raise interest rates.
USDJPY hung on to Friday’s post-NFP gains and traded in a 110.123-110.32 range. Prices are supported by rising US 10-year Treasury yields, which have climbed from 1.177% on Wednesday to 1.30% Friday. The yields dipped to 1.277% by today’s NY open.
AUDUSD and NZDUSD dropped alongside the plunge in gold, but prices quickly recovered and are back to Friday’s closing levels.
They are no top tier US or Canadian economic reports today. Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin are speaking today.
Chart of the Day- Gold (XAUUSD)
FX open, high, low, previous close
Source: Saxo Bank