October 21, 2020

USDCAD open (6:00 am ET) 1.3107-11, Overnight Range   1.3083-1.3129

  • Canada Inflation increases,  Retail Sales rise for fourth consecutive month
  • GBPUSD soars after Barnier says “deal is possible”
  • Canada CPI and Retail Sales ahead

FX Ranges at a Glance

Source: IFXA Ltd/RP

FX Recap and Outlook:  The Canadian economy is on the road to recovery.  At least that is what today’s domestic data dump indicated.  Retail Sales rose 0.4% in August, continuing the trend that began in May.  Core Retail Sales also rose 0.4%.  Inflation rose 0.5% y/y in September, easily beating the 0.1% increase in August.  Statistics Canada noted that prices rose in six of the eight major components. 

Overnight, traders were in a good mood.  Risk-on sentiment improved on hopes that Republican’s and Democrats will agree on a COVID-19 Relief bill, despite Senate Majority Leader Mitch McConnell’s opposition.   Those hopes knocked the US dollar down against the major G-10 currencies (except JPY)

GBPUSD rose 0.83% overnight, bolstered by hopes that the EU and UK will agree on a trade deal.  European Council President Charles Michel put the ball in the UK’s court saying ““Time is very short and we stand ready to negotiate 24/7, on all subjects, on legal texts. The UK has a bit of a decision to make, and it’s their free and sovereign choice.” Earlier, EU Chief Trade negotiator Michel Barnier said this about the UK’s trade demands; “You can’t have the butter, the money from the butter and the milkmaid’s smile.” The question for traders is “does Boris Johnson want a deal?” GBPUSD climbed from 1.2946 to 1.3094.  There was a lot of UK data, including CPI (actual 0.5% y/y), Retail Price Index, and Producer Price index, which were ignored due to Brexit headlines.

EURUSD rallied with the improved tone to risk sentiment, rising from 1.1823 to 1.1870, despite Eurozone equity markets giving up ground.  ECB President Christine Lagarde said it was a bad thing for inflation to go negative, which is a hint of more stimulus coming down the pipe.

USDJPY sank on the back of surging US Treasury yields.10-year US Treasury yields rose from 0.764% yesterday to 0.829% overnight, before drifting to 0.808% in NY trading.  USDJPY dropped from 105.42 to 104.83 in today.

AUDUSD and NZDUSD got a reprieve from selling pressures on expectations of central bank rate cuts. Both currency pairs rallied on US stimulus hopes.  AUDUSD got a bit of support from Retail Sales which only fell 1.5%, compared to the 4.0% drop in August.

USDCAD dipped on the back of improved risk sentiment but lost downside momentum in the face of technical support in the 1.3060-1.3090 area. 

There are not any US economic releases of note leaving US stimulus headlines to drive FX trading.

USDCAD Technicals: The March downtrend line is intact below 1.3300, and the intraday technicals are bearish below 1.3120.  A break of support in the 1.3060-90 area, targets the January low of 1.2950. A break above 1.3150 is needed to suggest a period of consolidation.   .  For today, USDCAD support is at 1.3080 and 1.3050.  Resistance is at 1.3120 and 1.3150.  Today’s Range 1.3080-1.3150

Chart: USDCAD daily

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank