Source: Ltd

February 2, 2021

  • EURUSD grinds lower even after Q4 GDP beats forecasts
  • RBA’s dovish surprise
  • US dollar opens mixed-USDX warning of break higher

USDCAD open (6:00 am ET) 1.2807-11,  Overnight Range 1.2784-1.2857,  Previous Close 1.2859

FX Ranges at a Glance:

Source: IFXA Ltd/RP

FX Recap and Outlook: It’s Groundhog Day.  That means six-more weeks of winter or a new entrée for the Road-Kill Café lunch menu.  Road-kill is how some nascent GameStop bulls feel, especially if they jumped in on January 29, and bought at the peak of $413.98.  It is trading at $191.00 in after-hours markets this morning, a drop of 54%.

Silver (XAGUSD) tumbled as well and is on its way to filling the gap between Friday’s close and Monday’s Asia open.

The US dollar opened on a mixed note.  EUR is the biggest loser, trailed closely by AUD, while CAD is the biggest gainer.  The bigger picture shows that the overnight moves are more noise than substance, as the currency majors remained locked inside well-defined trading bands.

Global equity indexes followed Wall Street’s lead and rallied, helped by improved hopes for a US stimulus deal approval.  European indexes are sharply higher, led by the French CAC 40 index, and  S&P 500 futures gained 0.84%.  Crude oil surged while gold prices edged down.

EURUSD took out support in the 1.2050 area, dropping from 1.2087 to 1.2028 in NY.  The slump occurred despite Euro-area Q4 GDP falling only 0.7% q/q compared to forecasts for a 1.2% decline, and stock market gains.  EU bungling of the COVID-19 vaccination roll-out and Italian political uncertainty are also weighing on prices.  EURUSD technicals are looking for a break of 1.2010 to extend losses to 1.1850.

GBPUSD continues to bounce inside the 1.3630-1.3760 range that has contained price action since January 26.  Coincidently, GBPUSD is virtually unchanged since Brexit became official December 31. Traders are awaiting Thursday’s Bank of England policy meeting and an update on plans, if any, for negative interest rates.

USDJPY is trading near the top of its 104.84-105.06 range, underpinned by higher 10-year US Treasury yields at 1.11% in early NY trading.  Prime Minister Suga is expected to announce an extension to the COVID-19 state of emergency tomorrow.

AUDUSD got knocked off its perch after the Reserve Bank of Australia (RBA) monetary policy statement was more dovish than expected.  The RBA extended its QE program, surprising those analysts who were expecting it to be left unchanged ahead of a tapering announcement in March. They also injected a dose of verbal currency intervention saying “The exchange rate has appreciated and is in the upper end of the range of recent years”   AUDUSD fell from 0.7660 to 0.7596 in NY.

 NZDUSD outperformed its antipodean cousin, and prices are unchanged from yesterday’s NY close.

Oil prices surged on news that Opec and friends are complying with the previously agreed production cuts. WTI climbed from $53.54/barrel to $54.91.

USDCAD has bounced off its overnight low of 1.2784 and is trading at 1.2821.  The stronger US dollar against EUR appears to have a bigger influence of USDCAD, than the positive risk sentiment seen in equity prices, while firm oil prices are acting as a drag on gains.

There are not any notable Canadian or US economic reports today.

Nasty blizzards in the NY area may curtail trading volatility as traders focus on snow removal and not markets.

USDCAD Technicals: The USDCAD technicals are bullish.   The overnight plunge halted right on the uptrend line from January 21 which came into play at 1.2780.  However, it will take a decisive break above 1.2830 to extend gains  to the 1.28880-90 zone.  Below 1.2830, and the door is wide open for another downside slide. For today, USDCAD support is at 1.2780 and 1.2730.  Resistance is at 1.2830 and 1.2890  Today’s Range 1.2760-1.2840

Chart: USDCAD daily

Source:  Saxo Bank

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

Source:  Saxo Bank