July 2, 2020

USDCAD Open (6:00 am ET) 1.3590-94, Overnight Range: 1.3578-1.3609

  • US employment picture brightens
  • US data dump ignored by FX traders
  • COVID-19 “tug of war”-Surge in US coronavirus cases vs hopes for vaccine

Percent change in US dollar

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Source: Saxo Bank/IFXA

FX Recap and outlook:  US nonfarm payrolls rose by a better than expected 4.8 million in June, alongside a drop in the unemployment rate to 11.1%, from 13.3 % in May.  Initial jobless claims numbers were slightly better than last week, which stoked hopes for a US economic rebound.

A single-day record increase in the number of new coronavirus cases (52,788) in the US raised concerns of a second-wave outbreak.  California, Texas, and Arizona were significant contributors to the increase.  However, rising hopes for a COVID-19 vaccine eased the fears.

The US dollar traded firmer, following the employment data, compared to the NY open.  So did S&P 500 futures.  They extended European gains and point to a strong open on Wall Street today.

The EURUSD rally from 1.1187 yesterday,  to 1.1300 overnight stalled.  Prices dropped to 1.1260 after today’s US data.  However, losses may be contained due to the better than expected Eurozone economic data reported earlier.   Eurozone unemployment at 7.4% and Producer Price reports were better than forecast.  EURUSD technicals are bullish.  The failure to break support at 1.1170, followed by the breach of resistance at 1.1270, targets further increases to 1.1360.

Canadian Trade data, although better than expected, was ignored.

GBPUSD probed support in the 1.2260 area Tuesday and when it failed to break, rallied hard.  Since then, GBPUSD climbed steadily, reaching 1.2526 just before dropping to 1.2480 after NFP.  The gains were fueled by improved risk sentiment due to chatter of a COVID-19 vaccine,

UK PMI data, and a jump in US June ISM Manufacturing PMI (actual 52.6 vs May 43.1).

USDJPY peaked at 108.13 Tuesday, then dropped to 107.35 in NY yesterday, before consolidating in a 107.35-107.55 range.  Improved risk sentiment and higher US Treasury yields which rose to 0.74% from 0.66% overnight lifted prices to 107.71 in NY trading.

WTI oil prices are just below the top of this week’s range ($40.53/b), having climbed from  $37.50 on Monday.  Prices are underpinned by Opec production cuts and the easing of pandemic restrictions.  However, everything could go pear-shaped if, as the WSJ reports, Saudi Arabia starts another price war because of Opec member production cut, non-compliance.

USDCAD plunged from 1.3700 on Tuesday to 1.3545 yesterday on the back of higher oil prices and lingering month-end portfolio rebalancing flows.  Today’s Canadian Trade data, although better than expected, was ignored.

USDCAD Technicals:  The intraday USDCAD technicals are bullish while prices are above 1.3540, looking for a break above 1.3620 to retest 1.3720.  A break below 1.3540 targets 1.3360. For today, USDCAD support is at 1.3540 and 1.3510.  Resistance is at 1.3620 and 1.3690.  Today’s Range 1.3550-1.3650

Chart: USDCAD daily

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Source:  Saxo Bank