April 22, 2020

USDCAD open (6:00 am EST) 1.4130-34    Overnight Range 1.4133-1.4236

  • Canada March CPI drops to 0.9% y/y, from 2.2% in February
  • Oil storage constraints continue to weigh on crude
  • US Senate passes another aid bill; COVID-19 defense spending now nearly $3 trillion
  • European stocks rebound: US futures point to higher open on Wall Street
  • US dollar extends yesterday’s losses, led by an AUDUSD rally

Chart: Currency gain/loss (%) against the US dollar from NY close to NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:  USDCAD barely budged when Stats Canada reported March CPI plunged to 0.9% y/y compared to February’s 2.2% reading.  The news was expected, and Bank of Canada Governor Stephen Poloz warned that the inflation rate would sink due to actions taken to combat the coronavirus pandemic.

The weekly API crude stocks report showed that US inventories rose 13.2 million barrels in the week ending April 17. Today’s EIA data is expected to show a similar build which will continue to pressure oil prices.

Saudi Crown Prince Mohammed Bin Salman proved beyond a doubt that “great wealth does not bring great brains.” A story in the Middle East Eye claims the Saudi/Russia oil price war started when Russia President Vladimir Putin refused an ultimatum, resulting in the Crown Prince temper tantrum. Fitch Ratings suggests Saudi Arabia needs oil at $91.00/barrel to balance their 2020 budget, and with Brent crude under $20.00/barrel, it will be a tad difficult. Then again, like the US, Canada and a slew of G-10 nations are proving, “who cares about a balanced budget.”

The US Senate passed another spending bill which brings the cost of the coronavirus fight to close to $3.0 trillion. Harvard University collected around $8.0 million of the coronavirus money, despite sitting on $40 billion and drawing the ire of President Trump, who is threatening a review of the whole endowment system.

There are reports of several US states relaxing lock-down regulations. Georgia, for one, opened gyms, hair salons bowling alleys and tattoo parlours, in an apparent “cull the herd” swipe at elderly Georgia residents.

EURUSD is trading at the top of its overnight 1.0846-1.0873 range, as traders await the results from Thursday’s EU leaders’ summit. Traders are hoping for a broad EU fiscal stimulus package to support the EU economies hammered by the pandemic.

GBPUSD inched higher overnight. Traders mostly ignored a slew of economic data as it was for March and didn’t take account the full impact of COFID-19 measures in the UK. Inflation rose 1.5% y/y, as forecast while PPI and Retail Price index were a tad better than predicted. Bank of England Governor Andrew Bailey warned about lifting lock-down restrictions “too early” as a second outbreak would damage confidence.

USDJPY traded in a narrow 107.46-107.75 range. USDJPY selling on risk aversion concerns stemming from falling oil prices was offset by USDJPY demand due to higher US Treasury yields. The 10-year yield climbed to 0.597% in early NY well above its overnight low of 0.553%.

An 8.2% surge in Australia Retail Sales in March (February 0.5%) triggered a steep AUDUSD rally which took prices from 0.62787 to 0.6353. The data boosted hopes that the worst of the pandemic was over. NZDUSD followed Aussie higher, rising from 0.5950 to 0.6002.

USDCAD traders appear to have gotten over oil price woes. The followed the lead of the AUDUSD traders and were looking ahead to an economic rebound when COVID-19 restrictions are lifted. USDCAD dropped steadily falling from 1.4236 to 1.4133 at the NY open.  

USDCAD technical outlook:

 The intraday USDCAD technicals are still bullish above 1.4090-1.4105, but that level is likely to be tested as prices continue to retreat from the “double top” resistance at 1.4260. A break below 1.4090 targets 1.4060 and then 1.4020.  A break above 1.4180 shifts the focus back to 1.4260.  For today, USDCAD support is at 1.4105 and 1.4060.  Resistance is at 1.4180 and 1.4260. Today’s Range 1.4090-1.4180

Chart: USDCAD hourly

Source: Saxo Bank