August 5, 2020
USDCAD Open (6:00 am) 1.3249-53, Overnight Range 1.3246-1.3328
- Gold blasts through $2,000.00, rises 3.5% since yesterday
- US political impasses fueling dollar selling
- Eurozone data underpins single currency US dollar opens with losses across the board led by AUD gains
Source: Saxo Bank/IFXA Ltd
FX Recap and outlook: Markets are giving a “Goldfinger” to the US dollar, and James Bond is missing in action. Zero-interest rate policy (ZIRP), and Negative interest rate policy (NIRP) eliminated a major barrier to owning gold (XAUUSD), helping to drive prices higher. The dysfunctional US Congress is grandstanding its way to another economic calamity, and investors want a safe-haven. Elevated geopolitical tensions and what appears to be the American’s quasi-nationalization of a foreign company are adding to XAUUSD demand.
Asia equity indexes closed on a mixed note, while European bourses are higher. US equity futures are pointing to another positive Wall Street open.
EURUSD traded with a positive bias in a 1.1795-1.1828 band in Asia, before accelerating higher to 1.1861 in early NY trading. Another strong Eurozone Retail Sales (5.7% m/m) report, following the 20.5% gain in May triggered the spike to the top of the range. However, some analysts suggest the gains won’t be sustained as these results reflect pent-up demand due to the previous lockdowns. Composite and Services data were mixed but both in expansion territory. Fibonacci retracement indicators on a weekly chart suggest that the break above 1.1814 (61.8% of 2018-2020 range) opens the door to a test of 1.2093, the 76.4% Fibonacci level.
GBPUSD continues to rally with the uptrend from the middle of July intact above 1.3000. Traders continue to ignore concerns about a second-wave of coronavirus infections forcing the government to delay further economy reopening plans. Prices were supported by UK Services PMI data at 56.5 compared to 47.1, the sharpest rate of growth in five years.
USDCAD blasted below support in the 1.3310-30 zone,
GBPUSD is trading at the top of its 1.3059-1.3131 range.
USDJPY traded with a modestly bearish bias, thanks to the US political dysfunction, but returned to the top of its 105.52-105.79 range in NY trading. Prices got a bit of a lift after US 10-year treasury yields climbed off 0.508% and touched 0.531%
AUDUSD and NZDUSD rallied on the back of broad US dollar weakness. AUDUSD managed to outperform its Kiwi, cousin despite New Zealand reporting a lower than expected unemployment rate (4.0% vs forecast 4.2%). China’s Caixin Services PMI data was a touch softer than in June (54.1 vs 58.4) but, still in expansion territory which supported the commodity bloc currencies.
USDCAD dropped, mirroring the antipodean moves, and getting a bit of a lift from a rise in crude prices. USDCAD blasted below support in the 1.3310-30 zone, triggering stop-loss selling in the process. The technical outlook is bearish, but USDCAD sellers may we way ahead of Friday’s US and Canadian employment reports.
Canada Merchandise Trade data is expected to show the deficit widening from -$0.680 billion to $0.9 billion, which will be explained away by ongoing COVID-19 issues.
US ISM Non-manufacturing and ADP payrolls reports are on tap.
USDCAD Technicals: The USDCAD technicals are bearish. The decisive break of support in the 1.3310-30 area, which is the 76.4% Fibonacci retracement of the 2020 range, suggests further losses to the 100% level at 1.2950. However, long term uptrend line support from September 2017 comes into play at 1.3170.For today, USDCAD support is at 1.3240 and 1.3210. Resistance is at 1.3310 and 1.3330. Today’s Range 1.3210-1.3310
Chart: USDCAD daily
Source: Saxo Bank