April 6, 2020
USDCAD open (6:00 am EST) 1.4104-08 Overnight Range 1.4082-1.4260
- Equities rally overnight on hopes Europe’s COVID-19 spread is slowing
- WTI oil prices gap lower after Russia delays Saudi/Opec talks until Thursday
- The US dollar started this week a lot higher than it did last Monday, except against CAD which is unchanged. However, it has retreated modestly against the G-10 majors (except JPY) since Friday’s close
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: Traders have drunk oceans-full of Gina and Tonic, Rum and Coke, or Vodka and Soda, to help wash away the nasty taste of COVID-19 and oil. It appears to be working.
Japan’s Nikkei 225 index closed with a 4.24% gain, and Australia’s ASX 200 index finished up 4.34%, helping to propel, European bourses higher. Germany’s DAX index has risen 4.35% (8:30 am EDT) the UK’s FTSE 100 index climbed 3.82% while US S&P 500 futures are 3.4% higher, all because the number of COVID-19 deaths dropped in Italy, Spain, and Germany.. It’s hard to see this rally continuing. Japan is poised to declare a Stater of Emergency tomorrow, and the US expects a surge in CVOID-19 cases this week.
WTI oil gapped lower in Asia after Russia delayed Monday’s Opec call twice, from Tuesday to Thursday.
Friday, WTI soared from $23.85 o close at $29.9 after the Russia/Opec call announcement. Prices gapped down at the Asia open touching $25.61/b before rebounding to $27.09 in early New York trading. Further price gains may be limited as there is no shortage of crude and demand has almost disappeared.
EURUSD opened little changed from Friday’s closing level despite a rather feisty overnight session. The single currency dropped to 1.0783 when Asia opened, rallied to 1.0833 just ahead of the European start, then fell to 1.0782 ahead of the NY open.
Traders reacted to COVID-19 news, oil price action and weak German Factory orders data. Prices are underpinned by hopes that EU Finance Ministers can get their acts together and provide coordinated fiscal stimulus, perhaps in the form of a so-called Coronabond.
GBPUSD dropped to 1.2212 at the open, then traded sideways, before rallying in Europe reaching 1.2320. Traders were optimistic that falling COVID-19 deaths in Spain and Italy, signaled the worst might be over for the European pandemic.
USDJPY rallied from 108.40 to 109.37 supported by US 10-year Treasury yield gains and the modest improvement to the global risk tone. Japan Prime Minister Abe is expected to announce a State of Emergency on Tuesday and details for a JPY 108.0 trillion stimulus package.
AUDUSD and NZDUSD traded higher on improved risk sentiment. The RBA monetary policy meeting tomorrow should be a non-event as they slashed rates to 0.25% on March 18.
USDCAD soared then sank in a wild overnight session, due to WTI headlines. News that Russia bailed out of today’s Opec call lifted prices, which fully reversed on news the call was rescheduled. USDCAD also retreated on broad US selling due to a mild improvement in global risk sentiment.
The Bank of Canada Business Outlook Survey due today may limit USDCAD losses as it will highlight domestic economic weakness, even before the worst of the pandemic hit.
USDCAD technical outlook
The intraday USDCAD technicals are bullish above 1.4080, which is where the uptrend from March 8 comes into play. It was tested and it held, overnight, and while the uptrend is intact, there is scope for a retest of 1.4260. A decisive move below 1.4060 targets 1.3920. For today, USDCAD support is at 1.4080 and 1.4040. Resistance is at 1.4150 and 1.4210
Chart: USDCAD 4 hour
Source: Saxo Bank