Photo: Wikimedia

January 26, 2021

  • FX cautious due to US stimulus package delay, vaccine shortages
  • UK unemployment rise to 5.0%,
  • US dollar opens with gains against G-10 major currencies.

USDCAD open (6:00 am ET) 1.2748-52,  Overnight Range 1.2708-1.2781 Previous Close 1.2744

FX Ranges at a Glance:

Source: IFXA Ltd/RP

FX Recap and Outlook:  FX risk sentiment soured overnight,  which gave the US dollar a boost.    US lawmakers continue to squabble leaving the much-ballyhooed stimulus proposal, just a plan and not a law.  Even more troubling is concern around COVID-19 vaccines.  AstraZeneca is delaying its COVID-19 vaccine shipments to the EU, and EU Commission President Ursula von der Leyden is upset. She said “it is not acceptable” and that the “the European Union will take any action required to protect its citizens and rights.” Those actions include banning exports of vaccines.

They should be careful what they wish for.  German Magazines Handelsblatt and Bild published reports that the vaccine was only 8% effective in elderly people.  The drugmaker vehemently denied the report.  The EU has vaccinated 1 out of every 100 people compared to 10 out of every 100 in the UK.

The US dollar gave back all of its overnight gains in early NY trading. Which may be due to dovish expectations for the FOMC meeting.

Asia equities closed with losses except for Australia’s ASX 200 index, European bourses are all higher, while Wall Street futures are flat.  Gold inched lower, and oil prices surged.

EURUSD traded lower in Asia, finding a bottom at 1.2109, then rebounded to 1.2160 in early NY trading. Negative risk sentiment from vaccine woes, Italian politics, and the delayed US stimulus plan are weighing on the currency, in addition to an abundance of caution ahead of the FOMC meeting.  The intraday technicals are looking for a break of 1.2110 or 1.2180.

GBPUSD dropped to 1.3611 just after Europe opened after UK employment data was released.   The unemployment rate rose to 5.0% in the three months ending in November. The news was expected, and prices quickly recovered to 1.3712 in  NY. .   GBPUSD could see additional demand from month-end portfolio rebalancing flows.

USDJPY traded in a narrow range again as price action tracked 10-year Treasury yield moves.  The BoJ minutes were released and suggested that the central bank may tweak its ETF purchases at the March meeting. The news did not have an impact on trading.

AUDUSD and NZDUSD dropped due to safe-haven US dollar demand in Asia, but are trading above their overnight peaks.  Australian CPI released tomorrow is expected  to rise 0.7% in Q4, q/q.

Broad US dollar moves dictated USDCAD price action.  Prices peaked at 1.2781 coinciding with the EURUSD decline, then dropped to 1.2708, as risk sentiment improved.  Rising WTI oil prices which remain steady around $53.00/barrel are providing some support.

US Consumer Confidence and Case-Shiller Home prices are due today.

USDCAD Technicals: The intraday USDCAD technicals are mixed  A case can be made for a bullish or bearish view.  The bulls see the bounce off the  1.2597 low and subsequent breech of 1.2670 as evidence of a short-term bottom, and are looking for retest of downtrend resistance at 1.2805 and 1.2890.  Meanwhile USDCAD bears  see the latest price action as just a correction while prices are below 1.2790. For today USDCAD support is at 1.2690 and 1.2660.  Resistance is at 1.2760 and 1.2805.  Today’s Range 1.2690-1.2760

Chart: USDCAD daily

Source:  Saxo Bank

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

Source:  Saxo Bank