USDCAD Open (6:00 am ET) 1.3884-88 Overnight Range 1.3838-1.3984
Percent change in currency value against US dollar-Mon. NY open to Fri. NY open (6:00 am EDT)
Source: Saxo Bank/IFXA
FX Recap and outlook: T here is nothing like a day off, a day at the beach, and the reopening of one’s favourite restaurant to turn a frown upside down. That is what happened overnight. Global economies are reopening, and headlines like the WSJ’s “For Economy, Worst of Virus Shutdowns Might Be Over” had traders scrambling for the so-called “risk assets.”
The major Asian equity indexes climbed, led by a 2.55% gain Japan’s Nikkei 225. The UK’s FTSE100 index took its cue from Asia and led Euro area bourses higher. S&P equity futures are up 1.83% as of 6:30 am ET, pointing to a strong start on Wall Street with the NYSE floor opening today.
Russian Oil Minister Alexander Novak predicted that the global oil market would be in balance by July, suggesting that Opec and Non-Opec production cuts are working. He is also Chairing a meeting with other Opec members today, to discuss extending the current 10 million bpd cuts beyond the end of June. WTI climbed to $34.53/barrel in Europe before profit-taking drove prices to $34.08/b at the NY open.
FX markets are presently ignoring the ongoing China/US spat. The US administration accuses China of mishandling the COVID-19 outbreak and is giving verbal support to Hong Kong protesters.
Out-going Bank of Canada Governor Stephen Poloz gave a lecture at the University of Alberta, yesterday.
He didn’t announce any new policy initiatives but did warn that policymakers will have to deal with “unparalleled uncertainty.” He appears before the Standing Senate Finance Committee on National Finance today, along with Senior Deputy Governor Carolyn Wilkins.
USDCAD jumped aboard the risk rally bus overnight, and dropped from 1.3984 to 1.3838 in early Toronto trading.
Chatter that the oil market could be in balance by July suggested that crude prices would be stable around current levels (or higher) and that sentiment exacerbated USDCAD selling.
EURUSD climbed to 1.0972 from 1.0894 as various countries ease lock-down restrictions and reopen their economies. EURUSD bulls were encouraged by France and Germany’s recently announced plan for a COVID-19 relief fund.
GBPUSD rallied alongside the rest of the majors, rising from 1.2187 to 1.2325. UK Prime Minister Boris Johnson said yesterday that non-essential retailers would start opening next week.
USDJPY rallied with the improved risk sentiment, but the rally stalled near the approach to resistance in the 108.10 area, which has capped gains since April 15. Bank of Japan Governor Haruhiko Kuroda said the BoJ is ready to ease using tools such as expanding the loan scheme, rate cuts, increased ETF buying or other measures.
AUDUSD and NZDUSD rallied with the improved risk sentiment. AUDUSD jumped to 0.6626 from 0.6540 on the improved outlook for growth as global economics reopen. Traders do not seem to be concerned about the ongoing China/Australia spat, which has resulted in China slapping punitive tariffs on some imports from Australia.
Today’s US data includes Case-Shiller Home Price Index, New Home Sales, and Consumer Confidence.
USDCAD Technicals: The technicals are bearish. The USDCAD downtrend from March 23 is intact while prices are below 1.4020, looking for a break of multi-bottom support at 1.3840 to trigger an acceleration of the downtrend and target 1.3410. It wouldn’t be a straight shot lower due to support at 1.3740 and 1.3660. However, the RSI’s on daily and 4 hour charts suggest USDCAD is oversold. For today, USDCAD support is at 1.3840 and 1.3810. Resistance is at 1.3910 and 1.3950. Today’s Range 1.3820-1.3920
Chart: USDCAD daily
Source: Saxo Bank