Photo: Pixabay

May 4, 2021

Global equity rally stalls

Canada Trade Returns to deficit

US dollar opens with gains across the board

USDCAD open 1.2314-18  Overnight Range 1.2278-1.2344, close 1.2276

FX at a Glance

FX Recap and Outlook

Holidays in China and Japan gave Asia traders all the incentive they needed to stay on the sidelines, and they did. Asia equity indexes (at least those that were open) finished the session on a mixed note.  European bourses opened soft but have managed to claw back some of the losses into the NY open. S&P 500 Futures are flat, oil prices are higher, and gold is near overnight session lows.  US 10-year Treasury yields bounced from an overnight low of 1.583% to 1.619% at time of writing.

Comments from Fed Chair Jerome Powell and New York Fed President John Williams reminded traders that FOMC monetary policy will stay unchanged, and that the Fed was still a long way from achieving its goals.  Their remarks were largely ignored.

EURUSD started to slide in Asia, then accelerated lower in Europe, falling from 1.2064 to 1.2000 in early NY trading.  The drop fully erased yesterday’s gains but halted at support from the April uptrend line. A break of 1.2000 suggests deeper losses to 1.1920.

GBPUSD price action mirrored EURUSD moves.  GBPUSD peaked at 1.3929 when US ISM PMI data was released yesterday, the drifted lower until bottoming out at 1.3853 in Europe today. Prices bounced after the UK final Manufacturing PMI result (60.9). It was expected as the UK had relaxed COVID-19 restrictions. The news suggests the Bank of England upwardly revise its forecasts at Thursday’s monetary policy meeting. GBPUSD has support at 1.3800 and a break above 1.3915 targets 1.4000.

USDJPY rallied from 109.04 to 109.48, coinciding with the rise in 10-year US Treasury yields to 1.62%. However, volumes were lighter than usual due to Japanese holidays.

AUDUSD dropped to 0.7710 from 0.7763 as broad US dollar demand vs the major currencies overshadowed a somewhat hawkish tilt to the Reserve Bank of Australia outlook.  The RBA left monetary policy unchanged. The hawkish bias stems from tweaks to the statement and an upgrade to its GDP growth forecast.  The message implied the RBA might discuss tapering at its July meeting.

NZDUSD dropped from 0.7202 to 0.7127 in early NY trading, with prices weighed down by US dollar demand.

USDCAD rallied as the greenback flexed its muscles but the rally stalled just below 1.2350.  Canada’s $1.4 billion trade surplus turned to a $1.14 billion deficit in March due to a 5.5% increase in in imports.  WTI oil prices climbed to $65.82, which helped to cap gains. WTI oil prices jumped to $65.82 in early NY trading before easing to $65.36 but even so, the gains acted as a drag on USDCAD .

There are not any top tier US economic reports until Friday’s nonfarm payrolls report which suggests the US dollar will continue to consolidate recent moves.

USDCAD Technical Outlook

The  intraday USDCAD technicals are bullish while prices are above 1.2290, looking for a decisive break above minor resistance in the 1.2350 area to extend gains to 1.2405. Below 1.2290 shifts the focus to 1.2250.   For today, USDCAD support is 1.2290 and 1.2270.  Resistance is at 1.2330 and 1.2350.  Today’s Range 1.2290-50

Chart: USDCAD 30 minute

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank