Source: Saxo Bank/IFXA
Wall Street soared yesterday, and global equity indexes followed overnight, mainly because of a report that a drug company Moderna, will start Phase 3 of a study to see if their COVID-19 vaccine works., beginning July 27. The scientists at Moderna want to know if the drug is safe and effective. Equity traders reacted like they announced a cure.
Equity markets ignored warning bells in the Big bank earnings reports. JPMorgan, Citibank, and Wells Fargo have made provisions for about $28.0 billion in loan losses, due to the pandemic. It’s hard to see equities rising when bankruptcies and unemployment soar. But they are.
Dow futures are up 2.0% as of 8:40 am ET.
EURUSD ticked higher in Asia, rising from 1.1392 to 1.1410, then popped to 1.1447 in NY, on the back of equity inspired “risk-on” sentiment.
Traders seem unconcerned about downside risks to the single currency from Thursday’s ECB meeting as officials are expected to leave rates and policy unchanged. Friday’s European Union Recovery Fund discussions are another risk. The intraday EURUSD technicals are bullish following yesterday’s break above 1.1370, and looking for a test of resistance of the March peak of 1.1490.
GBPUSD rallied alongside the single currency but prices remain below resistance in the 1.2660 area. UK inflation rose 0.6% y/y, and Retail Price Index climbed 1.1% y/y, which provided a little additional support to the currency pair.
USDJPY traded sideways in Asia, then dropped from 107.30 to 106.90 in Europe, opening at the low in NY. The BoJ left rates and policy unchanged, as was expected.
AUDUSD, and to a lesser extend NZDUSD, rode the COVID-19 vaccine wave. However, AUDUSD continues to struggle with resistance around the 0.7000 area. Traders ignored a weak Westpac consumer Confidence reading of -6.1% (previous 6.3%.)
WTI oil prices are bouncing between $39.00-$41.00/barrel, awaiting the results of the Opec meeting.
The cartel is expected to eliminate the emergency production cut of 2.2 million barrels/day, that has been in place since April.
USDCAD drifted lower, alongside broad US dollar weakness, but remains rangebound inside a 1.3490-1.3660 band. The Bank of Canada is widely expected to leave policy unchanged, but the currency may be vulnerable to a weak, or pessimistic outlook. Canada Manufacturing Sales surged 10.7% in May, compared to a drop of 28.5% in April.
US Empire State Manufacturing rose 17.2% in July and Import/Export data was better than expected.
USDCAD Technicals: USDCAD price action is just noise inside the well-defined 1.3460-1.3660 range. Today, the intraday technicals are bearish below 1.3610, looking for a break of minor uptrend support at 1.3560 to extend losses to 1.3505. For today, USDCAD support is at 1.3560 and 1.3510. Resistance is at 1.3610 and 1.3710. Today’s Range 1.3530-1.3630
Chart: USDCAD monthly
Source: Saxo Bank