March 17, 2021

USDCAD open (6:00 am ET) 1.2483-87,  Overnight Range 1.2472-1.2499,  Close 1.2472

FX Ranges at a Glance 

Source: IFXA Ltd/RP

FX Recap and Outlook:  Canada’s inflation rate slowed in February.  Headline CPI rose 1.1% y/y well below the 1.4%  forecast, but a tick higher than the 1.0% y/y result in January.  Core-CPI was worse.  It rose 1.2% y/y (forecast 1.4%), well-below the 1.6%  level in January.  The news had little impact on USDCAD trading.

It was a rather subdued session overnight.  Asia equity indexes closed nearly unchanged, and European traders are also staying close to home.  Wall Street futures are a tick lower after posting new intraday highs yesterday. FX markets were not any livelier.

Fed Chair Jerome Powell is front and center.  The FOMC statement and Summary of Projections and Powell’s press conference will determine the US dollar direction for the next few weeks.   Traders are curious to see if the dot-plot forecast brings rate hikes forward in light of rising Treasury yields.

The Fed and other central banks are spinning higher bond yields as a “good thing” because that means traders have an optimistic view of economic growth.

If the Fed does not seem concerned with rates at current or even levels, bond traders will most certainly attempt to find the level where the Fed becomes concerned.

EURUSD traded in a 1.1867-1.1987 range in part because US 10-year Treasury yields climbed to 1.641% from 1.591% yesterday.  Eurozone CPI was as expected at 1.1% y/y and was not a factor for traders.   EURUSD will drift toward 1.1900 until the 10:00 am ET option  cut due to a chunky strike expiring. The intraday technicals are bearish below 1.1950, looking for a test of 1.1850. 

GBPUSD is trading with a mildly bullish intraday bias while prices are above 1.3890.  Traders have forgotten yesterdays concerns with BoE Governor Bailey’s dovish remarks.

The UK has seriously outperformed the EU is getting its citizens vaccinated.  Some analysts suggest that means the UK’s post-pandemic economic rebound will be far sooner than that of the EU.  However, there are trade tensions and the risk of tariffs over the UK’s unilateral decision to extend the Northern Ireland border grace period.

USDJPY is bid along with the rise in US Treasury yields. So far, traders have ignored BoJ Governor Kuroda’s attempt at verbal intervention.  He said he is monitoring the yen and its impact on inflation. The Japanese government is reportedly planning to end the State of emergency in Tokyo on March 21.

AUDUSD and NZDUSD traded sideways while tracking broad US dollar movements.

RBA Assistant Governor Christopher Kent said the RBA would not raise interest rates until inflation was sustainably inside the 2-3% band.

The International Energy Agency (IEA) oil market report said they disagree with predictions that oil is on the cusp of a “super-cycle” ahead of a supply shortfall.  They noted that as of January, OECD stocks were still 110 million barrels higher than a year ago.  Oil prices ignored the news as traders adjusted positions ahead of today’s FOMC.

USDCAD bounced off of support at 1.2440, but the bounce was of the dead-cat variety.  USD CAD is undermined by firm oil prices,  hopes for a domestic economic boost from the US stimulus plan, and bearish intraday technicals.

USDCAD Technicals:  The intraday and short term technicals are bearish.  The downtrend from November is intact below 1.2650 and there is a minor intraday downtrend below 1.2480. A decisive break below 1.2420 targets 1.2270.  For today, Support is at 1.2440 and 1.2370    Resistance is at 1.2480 and 1.2510. Todays Range 1.2370-1.2470

Chart: USDCAD weekly

Source:  Saxo Bank

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

Source:  Saxo Bank