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January 15, 2021

  • Biden blows $1.9 trillion-Markets yawn
  • US Retail Sales: better than November, worse than forecast
  • FX mildly risk negative

USDCAD open (6:00 am ET) 1.2692-96,  Overnight Range 1.2638-1.2719

FX Ranges at a Glance:

Source: IFXA Ltd/RP

FX Recap and Outlook:   It’s raining money in America.  Joe Biden unveiled a $1.9 trillion relief proposal to great fanfare from Democrats and a cool reception from financial markets. That’s because the important details were leaked.  There were plenty of US dollar sellers ahead of Biden’s announcement and lots of dollar buyers afterwards.

Traders have shifted their focus to the next potential calamity-Biden’s inauguration on January 20.  Officials have deployed over 7,000 National Guard troops in Washington, and are expected to increase that number to 20,000. The media is hyping reports of massive, armed pro-Trump demonstrations in all 50 state capitols.

Asia equity traders were on the fence.  Japanese indexes were lower, Chinese indexes mixed, and Australia’s S&P/ASX 200 was unchanged. European bourses are in the red, as are Wall Street futures.  WTI oil prices are down 1.42%, while gold inched higher.

US Retail Sales fell 0.7% m/m in December, compared to November’s 1.4% m/m decline.  Producer Prices were unchanged, as expected, at 0.8% y/y.  FX markets did not react to the data, mainly because they are still digesting the implications of Biden’s relief plans.

EURUSD rejected a move below support at 1.2120 yesterday and climbed to 1.2176 by the afternoon. Prices slid steadily overnight and are now just above support once again. Biden’s spending announcement didn’t offer any surprises, which encouraged profit-taking.  Also, prices are weighed down by the coronavirus outbreak in Europe.  German Chancellor Angela Merkel is reportedly planning tough new restrictions.  Fed Chair Powell’s assertion that “the time to raise rates is no time soon” should limit the downside.

GBPUSD continues to bounce inside a 1.3600-1.3700 range.  The currency pair is underpinned by Bank of England officials’ downplaying the chances for negative interest rates. In addition, the UK vaccine roll-out is humming along with plans to vaccinate 500,000 people/day, starting next week.  In comparison, Canada has managed to vaccinate a total of 387,899 people as of January 12.

UK November GDP was a better than expected negative 2.6% m/m (forecast -5.7%) but not a factor.

USDJPY is trading at the bottom of its 103.63-103.85 range with the latest dip in Treasury yields driving the downward dip.  The intraday technicals are bullish while prices are above 103.25.

AUDUSD and NZDUSD fell as traders unwound bullish positions established ahead of Biden’s stimulus plans.  The short term AUDUSD technicals are bullish, however, a break below 0.7700 negates that view and targets 0.7550.

USDCAD rejected a move below support in the 1.2630 area yesterday and subsequently rallied to 1.2719 in Toronto trading today.  Traders are unwinding short USDCAD positions after Biden’s stimulus package didn’t deliver any surprises.  Price may also be supported by the latest round of coronavirus restrictions in Ontario and Quebec, which will have a negative impact on Q1 growth.

USDCAD Technicals:   The intraday technicals are bullish above 1.2650.  Today’s  break above 1.2705   targets 1.2750 and could extend gains to 1.2790.  A move below 1.2640 negates the upside trend and argues for additional weakness.  A decisive break above 1.2820 suggests a short-term low is in place and suggests a period of 1.2630-1.3000 consolidation.  For today, USDCAD support is at 1.2670 and 1.2705.  Resistance is at 1.2750 and 1.2790.  Today’s Range 1.2690-1.2750

Chart: USDCAD daily

  Source:  Saxo Bank

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

Source:  Saxo Bank