June 22, 2020

USDCAD Open (6:00 am) 1.3571-1.3575, Overnight Range: 1.3562-1.3629

  • Hopes for global economic recovery trump second-wave COVID-19 fears
  • China central bank leaves interest rates unchanged
  • GBPUSD bounces after BoE Governor’s comments lower risk of negative rates
  • AUD leads G-10 major currencies higher vs USD, except against JPY

Percent change in US dollar since Thursday’s NY open

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Source: Saxo Bank/IFXA

FX Recap and outlook:  Friday’s US dollar rally is just a memory as the gains have been reversed.  The greenback opened in New York today, nearly unchanged from Friday’s opening level.  NZD is a tad firmer, while GBP is modestly lower.  The others are close to flat.  Global equity markets didn’t provide much direction.  Asia’s main indices closed on a mixed to unchanged note.  European bourses are modestly lower while US S&P futures are a tad higher.

EURUSD climbed steadily from the opening bell in Asia.  The single currency rose from 1.1170 to 1.1226, in part because traders are buying into hopes for a global economic recovery, rather than fears of a second-wave coronavirus outbreak.  Those hopes may be misplaced, at least from an American perspective.  The Washington Post reported that 29 states and US territories saw an increase in their seven-day average of newCOVID-19 cases.

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Source: Washington Post

GBPUSD surged to 1.2432 from 1.2337 in Europe, before slipping to 1.2380 in NY.  The currency pair tracked EURUSD higher, while getting an added boost from comments by Bank of England Governor Andrew Bailey.  Mr Bailey suggested that the BoE would not raise interest rates until quantitative easing was reversed, which is totally opposite to the previous BoE policy.  Traders concluded that if so, the risk of negative interest rates was negligible.

USDJPY traded quietly in a tight 106.77-107.00 range.  Lower US Treasury yields, and lingering second-wave COVID-19 fears weighed on prices.

AUDUSD got a lift following comments by Reserve Bank of Australia Governor Philip Lowe.  He credited AUDUSD’s sharp rebound from its March low to effective coronavirus crisis management.  He said he would like a lower currency but “at the moment, I think it’s really hard to argue that the Australian dollar is overvalued.”  NZDUSD moved higher as well.  Traders are looking ahead to Tuesday’s Reserve Bank of New Zealand policy meeting.  The RBNZ is expected to leave rates and policy unchanged.

USDCAD dropped alongside the improved risk sentiment tone, supported by steady to higher crude oil prices.  Bank of Canada Governor Tiff Macklem is speaking today His topic is “Monetary Policy in the Context of COVID”

Today’s US data releases include Chicago Fed National Activity Index for May and Existing Home Sales.

USDCAD Technicals:  The intraday USDCAD are bearish while trading below 1.3635 looking for a break below 1.3505 to extend losses to 1.3430.  A break below 1.3430 opens the door to a test of support at 1.3200.  A decisive break above 1.3535 would negate the downtrend and shift the focus to resistance at 1.3860.  For today, USDCAD support is at 1.3550 and 1.3510.  Resistance is at 1.3635 and 1.3680. Today’s Range 1.3540-1.3620

Chart: USDCAD 4 hour

Source:  Saxo Bank