January 29, 2021
- November GDP beats guesses and boosts Canadian dollar
- Global equity Indexes sink-GameStop soars again
USDCAD open (6:00 am ET) 1.2828-32, Overnight Range 1.2756-1.2873, Previous Close 1.2831
FX Ranges at a Glance: Month-to-Date
Source: IFXA Ltd/RP
FX Recap and Outlook: Canada November GDP rose by 0.7% m/m, well above the forecast for a 0.4% increase, which exacerbated USDCAD selling pressures. Traders ignored the part in the statement that said “total economic activity was about 3% below the pre-pandemic level in February.” USDCAD extended overnight losses from its opening level of 1.2830 to 1.2756. USDCAD attempted top push higher overnight but the rally stalled just below resistance in the 1.2880-1.2900 area, just as Europe opened. Prices declined steadily, in part due to month-end US dollar selling pressures.
Overnight, FX markets churned, global equity indexes burned, and US Treasury yields firmed. Equity-market darling GameStop (GME: NYSE) turned a 44.29% drop in its price yesterday to a 98.7% gain in after-hours trading (as of 6:00 am PT) It is an impressive performance for a company that is the 2021 equivalent of a 1921 horse-drawn carriage maker.
EURUSD closed at 1.2122 then dropped to 1.2097 in Asia. European’s bought the single currency and drove prices to 1.2154 in NY trading. Prices got a bit of a boost from somewhat encouraging German economic data. German Q4 GDP rose 0.1% q/q compared to 0% expected. The unemployment rate improved as well. More blather from ECB officials failed to spark any interest.
GBPUSD dropped from 1.3723 to 1.3659 just before NY opened then recouped all the losses, rising to 1.3750. Month-end portfolio rebalancing demand is playing a role. The currency gained despite threats from the EU that they will withhold UK coronavirus shipments.
USDJPY rallied from 104.24 to 104.93, supported by a jump in US 10-year Treasury yields to 1.07% and an improvement in domestic Industrial Production which only dropped 3.2% y/y compared to expectations for a 3.5% decline.
AUDUSD and NZDUSD dropped in Asia, then rallied with prices tracking the modest improvement in risk sentiment.
US data includes Michigan Consumer Sentiment, Pending Home Sales, and Chicago PMI.
USDCAD Technicals: The USDCAD rally stalled right at downtrend line resistance in the 1.2880-1.2905 are and retreated to just above minor resistance at 1.2740 A breech of this level would negate the short-term rally and shift the focus to 1.2650. A break above 1.2900 targets 1.3040. For today, USDCAD support is at 1.2740 and 1.2710. Resistance is at 1.2830 and 1.2880 Today’s Range 1.2730-1.2830.
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank