January 16, 2021
- US closed for Martin Luther King Day
USDCAD open (6:00 am ET) 1.2774-78, Overnight Range 1.2729-1.2798, Previous Close 1.2738
FX Ranges at a Glance:
Source: IFXA Ltd/RP
FX Recap and Outlook: The US dollar extended Friday’s gains in a quiet overnight session. There are ongoing concerns that the Biden Relief package would spark inflation and force the Fed to hike rates sooner than expected. Traders are also a tad cautious about the prospect of wide-spread violence from pro-Trump supporters on Biden’s inauguration day.
Former Fed Chair Janet Yellen is also helping to underpin the US dollar. She is Biden’s nominee for Treasury Secretary, and, according to the Wall Street Journal will tell the confirmation hearing: “The value of the U.S. dollar and other currencies should be determined by markets. Markets adjust to reflect variations in economic performance and generally facilitate adjustments in the global economy The United States doesn’t seek a weaker currency to gain competitive advantage. We should oppose attempts by other countries to do so.”
Asia equity markets closed on a mixed note. Japan’s Nikkei 225 and Australia’s ASX 200 indexes closed with loses while mainland China indexes rallied. European equity indexes are down across the board. Gold and oil prices ticked higher.
EURUSD traded narrowly in a 1.2057-1.2086 range. Traders are looking ahead to Biden inauguration on Wednesday, and the ECB monetary policy meeting Thursday. The ECB is expected to leave rates and policy unchanged. Italian political concerns are weighing on prices.
GBPUSD continues to suffer from post-Brexit blues and broad US dollar strength due. GBPUSD is also suffering from concerns about the negative economic impact from stringent COVID-19 containment measures. Fitch ratings affirmed UK debt at AA- outlook negative. UK Rightmove House Price Index was -0.9%% m/m but not a factor.
USDJPY traded in a 10370-103.88 range. Prices retreated alongside the dip in US 10-year Treasury yields from 1.116% to 1.087%.
AUDUSD and NZDUSD dropped on the back of broad US dollar strength. Chinese data was mixed and ignored. China industrial production was better than expected. China 2020 GDP grew 2.6% y/y, despite the COVID-19 crisis.
USDCAD rallied on the back of broad US dollar strength, extending gains from Friday’s 1.2680 low, to 1.2798 overnight. Prices may have seen additional support from a CBC report saying Biden would cancel the Keystone XL pipeline on day one of his presidency. A lack of vaccines may delay Canada’s post-pandemic economic recovery. Pfizer-BioNTech reduced COVID-19 vaccine shipments to Canada by 50% so the company can retool its production.
USDCAD Technicals: The intraday technicals are bullish above 1.2760. looking for a break above December downtrend line resistance in the 1.2800-05 area to extend gains to 1.2870. A break below 1.2750 suggests the rally is merely corrective, and puts 1.2630 back in play. For today, USDCAD support is at 1.2760 and 1.2700. Resistance is at 1.2805 and 1.2850. Today’s Range 1.2720-1.2820
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank