Source: IFXA Ltd/RP
Mr Powell’s remarks are expected to highlight downside risks to the economy, problematic unemployment levels while encouraging the government’s $1.9 trillion stimulus plan. The Fed Chair does not want the bond market to force the Fed to raise interest rates nor does he want dovish policy to fuel an equity market bubble.
Asia equity indexes closed with modest gains except for China’s Shanghai Shenzhen CSI 300 index, which fell 0.32%. The German Dax is down 1.30%, leading the major European equity indexes lower, and S&P 500 futures are down 0.68% (6:30 am ET). Gold and oil prices are firmer and 10-year US Treasury yields a tick lower.
US Treasury Secretary Janet Yellen repeated her concerns about Bitcoin, describing it as a “highly speculative, inefficient digital currency, often used in illegal transactions.” It wasn’t anything she hadn’t said before. Her remarks, and a delayed reaction to Elon Musk’s weekend observation that Bitcoin prices seemed high, helped drive BTCUSD down from $58,332.36 to $45,047.78 between yesterday and today. Prices are just above the low in NY.
EURUSD climbed from 1.2158 to 1.2179 in Asia, then dropped to 1.2145 in NY as traders jockey for position ahead of the Powell testimony. Eurozone January inflation was 0.9% y/y as expected.
ECB President Christine Lagarde raised eyebrows when she said, “The ECB is closely monitoring evolution of long-term nominal bond yield.” EURUSD needs a decisive break above 1.2180 to extend gains to 1.2250.
GBPUSD continues its march toward 1.4350. Prices inched higher in Asia and came within spitting distance of 1.4100 in early Europe trading, topping out at 1.4096. GBPUSD is underpinned by the government’s lockdown exit plans while ignoring the employment report. Analysts are concerned that the government’s furlough scheme masks a serious unemployment problem.
USDJPY recouped some of yesterday’s losses, rising from 104.93 to 105.31.
Traders are awaiting bond market developments after Powell’s testimony.
NZDUSD consolidated this week’s gains in a 0.7309-0.7332 range ahead of Wednesday’s RBNZ monetary policy meeting. Prices have been bolstered by broad US dollar weakness and firm commodity prices stemming from expectations of a global economic rebound. It wouldn’t be much of a surprise if the RBNZ rained on the parade and whined about the currency’s high value.
AUDUSD retreated from its overnight peak of 0.7933 and dipped to 0.7805 in NY. The short-term fundamentals and technicals are bullish looking for a move above 0.8000, although intraday overbought conditions suggest prices could dip before the next rally.
USDCAD losses have not kept pace with AUDUSD or NZDUSD gains, but that could change quickly if prices drop below 1.2580. The prospects for a robust US economic recovery and high commodity prices are undermining USDCAD.
USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.2630, looking for another break of support at 1.2580 to extend losses to 1.2500. Longer-term Fibonacci retracement of the September 2017 to March 2020 range suggests that the break of 1.2612 (78.6% Fibo retracement)) opens the door to a 100% retracement which is 1.2055. For today, USDCAD support is at 1.2580 and 1.2540. Resistance is at 1.2630 and 1.2690. Todays Range 1.2550-1.2630
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank