Photo: Wikimedia

January 21, 2021

  • ECB leaves rates and policy unchanged, as expected
  • Loonie hangs on to post-BoC gains
  • US dollar slides for third day

USDCAD open (6:00 am ET) 1.2619-23,  Overnight Range 1.2612-1.2634, Previous Close 1.2633

FX Ranges at a Glance:

Source: IFXA Ltd/RP

FX Recap and Outlook:    Financial markets were in a good mood overnight.  Asia took their lead from Wall Street’s record close and closed with strong gains across the board except for Hong Kong’s Hang Seng index which was flat.  European equity traders were not as boisterous but still drove indexes modestly higher.  S&P 500 futures are a tad firmer.  Gold is unchanged and oil prices are lower.

EURUSD traded sideways in Asia, found a bottom at 1.2106 in early European trading, then climbed to 1.2167 in NY trading.The ECB left rates and policy unchanged, as expected.  The statement noted “the Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.”  President Lagarde reminded markets that the “ECB continues to monitor the exchange rate,” but traders did not react.

GBPUSD traders liked the idea of a Biden administration and $1.9 trillion in stimulus spending plans. The currency pair rallied from 1.3655 to 1.3745 before inching down to 1.3725 in NY trading.  GBPUSD is reportedly underpinned by pent-up demand for UK assets now that Brexit uncertainty is over. However, massive budget deficits, and widespread coronavirus containment measures, will slow gains.

USDJPY slipped to 103.34 from 103.66 due to broad US dollar selling.  The Bank of Japan left interest rates unchanged  at -0.10%  .  The vote was not unanimous.  One board member dissented. The BoJ reminded markets that it would take additional easing measures as required.

NZDUSD outperformed AUDUSD.  Westpac Bank bailed on its forecast of two RBNZ rate cuts in 2021, and combined with general US dollar bearishness, lifted NZDUSD from 0.7173 to 0.7217.  AUDUSD inched higher on news that the unemployment rate ticked lower to 6.6% from 6.7% in November.

USDCAD is trading just above its overnight low.  Prices are weighed down by yesterday’s Bank of Canada upgrade of GDP growth in 2021 from 4.6% to 5.2%, and widespread US dollar selling pressure because of the US stimulus plan.

Prime Minister Justin Trudeau is as proud as a peacock, and will be at his smarmy-best on Friday.  President Joe Biden has decided Trudeau will be his first world-leader call.  The call will go something like this:  “Hello, little buddy, Joe here.  Just called to tell ya that you are America’s best friend, most important trade partner, and by the way, stop yammering about Keystone. It’s done! Finished! Kaput! Goodbye.”

US Initial Jobless Claims rose 900,000, close to the forecast of 910,000.  Philadelphia Fed Manufacturing Index was 26.5 compared to 9.1 previously.

USDCAD Technicals:   The intraday technicals are bearish!  The intraday downtrend is intact below 1.2680, which guards the November downtrend line at 1.2780.  Longer term, the break below  1.2680 (the 76.4% Fibonacci retracement level of the 2017-2020. 1.2068-1.4670 range) targets the 100% retracement level of 1.2068. For today, USDCAD support is at 1.2605 and 1.2540.  Resistance is at  1.2650 and 1.2690. Today’s Range 1.2570-1.2670

Chart: USDCAD daily

  Source:  Saxo Bank

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

Source:  Saxo Bank