Eurozone PMI’s show EU economy rebounding
Canada Retail Sales rise 3.6% in March
US dollar opens modestly lower, but well-down for the week
FX at a Glance-Monday to Friday change
FX Recap and Outlook
Global equity markets are finishing the week on a positive note. The major Asia equity indexes closed with modest gains, and European bourses are higher, except for the UK FTSE 1000, which is flat. S&P futures point to a positive open on Wall Street. Commodity prices have inched upwards while 10-year Treasury yields are unchanged at 1.637%.
EURUSD traded quietly in Asia, then bounced between 1.2211-1.2239 in Europe. Eurozone PMI data suggests a robust economic rebound is occurring. Manufacturing, Services, and Composite readings were 66.1, 55.1, and 56.9, respectively, and above forecasts. Prices are also supported by the easing of US rate hike fears. EURUSD is bullish above 1.2170, looking for a break above 1.2250 to extend gains to 1.2350.
GBPUSD rallied from 1.4170 to 1.4233 on the back of improved global risk sentiment, stoked by steady to soft US Treasury yields. Improving Consumer Confidence and surging April Retail Sales (actual 9.2% m/m vs forecast 4.5%m/m) boosted prices. GBPUSD is bullish above 1.4175 with a break above 1.4250 targeting 1.4350.
USDJPY slumped to 108.62 from 108.89 due to soft US Treasury yields supported by expectations for US monetary policy to remain ultra-accommodative for another year or so. Japan inflation continues to be weak. April CPI fell 0.4% y/y.
AUDUSD and NZDUSD opened nearly unchanged. Traders ignored Australia Retail Sales (actual 1.1% m/m vs forecast 0.5%) and stayed cautious as commodity prices consolidated this week’s losses.
USDCAD ignored today’s Retail sales report (actual 3.6% m/m vs forecast 2.2%). The data is considered stale in the face of COVID-19 lockdowns and restrictions in April, which may lead to a sharply lower April reading.
USDCAD traded erratically since Tuesday, with prices bouncing between 1.2015 and 1.2141.USDCAD climbed steadily overnight, rising from the close of 1.2058 to 1.2093 in Europe, then dropping to 1.2031 in early NY trading. Prices are closely tracking risk sentiment, which is ending the week on a positive note. Bank of Canada Governor Tiff Macklem expressed concern about rising household debt and higher home prices. Of course, he did not acknowledge that it was the BoC’s policies that created the problem.
USDCAD is likely to trade with a negative bias due to steady to firm commodity prices and expectations for pent-up consumer demand to fuel an economic rebound.
Today’s US economic reports are second-tier and not expected to impact FX markets. Domestic activity may be curtailed as Monday is a holiday in Canada, and people will want to get an early start to the weekend.
USDCAD Technical Outlook The intraday USDCAD technicals are bearish with the break below 1.2090 shifting the focus to support in the 1.1935-65 zone. For today, USDCAD support is at 1.2015 and 1.1980. Resistance is at 1.2090 and 1.2120 today’s Range 1.2000-1.2070
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank