July 9, 2020

USDCAD Open (6:00 am) 1.3492-96, Overnight Range: 1.3495-1.3524

Source: Saxo Bank/IFXA

FX Recap and outlook:  If its too good to be true, it probably isn’t.   Global stock markets are grinding out gains with traders seemingly oblivious to renewed coronavirus risks, especially in the US.  Today’s headlines are like those seen in April reporting protective supply shortages, and intensive care beds nearing capacity in may states.  There were 62,571 new cases reported yesterday. 

Chart:  New reported cases per day-USA

Source:  Washington Post

Chinese equity traders do not care about US/China tensions or America’s COVID-19 problems.  The are buying stocks incessantly.  China’s Shanghai Shenzhen CSI 300 index climbed 1.40% today and is up 16.2% in July.  The other Asia equity indexes closed higher as well.  European bourses are mixed while S&P 500 futures are flat.  Gold (XAUUSD) rallied again, and  traders are targeting $1,900/ounce.

US Initial Jobless Claims dropped to 1.3 million this week, better than forecast. The news is undermining the US dollar as some traders see the data as evidence the US economy is bouncing back from the impact of COVID-19 measures.

The US dollar index (USDX) is flashing Yellow.  US dollar bears should take note.  USDX tested support at 96.20 overnight and it held, as it has since June 15.  It needs to a decisive close below that level to signal a renewed USD downtrend.  If not, a rebound to 97.40 is in the cards.

Chart: USDX daily

Source: Saxo Bank

S&P 500 futures are flipping between positive an negative which is making FX markets choppy.

EURUSD tested 1.1370 resistance and then promptly rejected further gains.  Prices dropped to the overnight low in early NY trading but have recovered somewhat.  

GBPUSD is sitting in the middle of its overnight 1.2603-1.2365  overnight range.  Traders are mildly positive following yesterday’s mini UK budget and have shrugged off worries about UK/EU trade talks.

USDJPY traders are not ignoring the resurgence of coronavirus in the US. They are selling it due to safe-haven demand for yen and soft US Treasury yields.

AUDUSD and NZDUSD are tracking broad US dollar moves

USDCAD ignored the news of the ballooning budget deficit and the jump in total Federal debt to $1.0 trillion.  Perhaps traders were relieved when the economic savant, paragon of politics, Justin Trudeau said: “We took on debt, so Canadians didn’t have to.”  He may be a tad confused as to the source of funds used for government expenditures.

USDCAD is tracking Wall Street price action and US dollar sentiment.  Domestic influences don’t count.

But they will.  Arguably USDCAD is in the buy zone.

USDCAD Technicals:   The short term technicals are bullish above 1.3480, the  hourly uptrend line from June 8 which guards the daily uptrend line from January which comes into play at 1.3440.   A break below 1.3440 opens the door to further losses to 1.3190, initially.  For today, USDCAD support is at 1.3480 and 1.3460.  Resistance is at  1.3540 and 1.3580. Today’s Range 1.3480-1.3560

Chart: USDCAD 4 hour

Source:  Saxo Bank