“Make the Rich Pay”

Photo: Pixabay

April 23, 2021

PMI data lifts EURUSD and GBPUSD

Biden wants to double Capital Gains taxes

US dollar opens with losses against G-10 majors

USDCAD open 1.2483-87, Overnight Range 1.2472-1.2508, close 1.2504

FX at a Glance

Source: IFXA/RP

FX Recap and Outlook

President Biden wants to raise capital-gains taxes to 43.4%. The news made Wall Street unhappy and sent the Dow Jones and S&P 500 indexes down about 1.0%. Global equity indexes wobbled as well. Asia closed on a mixed note. New coronavirus containment measures helped push the Nikkei 225 down 0.57%. Hong Kong’s Hang Seng ignored the drama and rose 1.12% while Australia’s ASX200 was flat.

European bourses gave up PMI data gains and are down across the board, with weekend profit taking playing a role. WTI oil prices are flat, while gold is slightly higher. 10-year Treasury yields barely moved and are 1.551%.

Bitcoin (BTCUSD) got hammered on news of Biden’s capital-gains tax plan. Prices plunged 14.4% in the past 24 hours, dropping from $55,471.08 to 47,467.91. The have since climbed to $49,300.59

EURUSD drifted higher in Asia, then took-off in Europe following Euro area PMI data, rising from 1.2014 to 1.2061, where it was in early NY trading. The “flash” April Eurozone Manufacturing (63.3), Services (50.3), and Composite (53.7) PMI reports were all higher than forecast. The results are the second-highest since September 2018.

Source: IHS Markit

EURUSD continues to be supported by broad US dollar weakness on fading Treasury yield gains and by the improving pace of Euro area COVID-19 vaccinations. The ECB survey of professional forecasters showed CPI forecasts of 1.6% compared to 0.9% previously. Traders shrugged off a somewhat dovish ECB meeting. President Christine Lagarde said it was too early to discuss, and decisions would be data-dependent. The EURUSD technicals are bullish above 1.2000, looking for a break above 1.2080 to extend gains to 1.2180.

UK traders are feeling feisty as they celebrate St George’s Day. GBPUSD rallied from 1.3840 to 1.3890, thanks to a surge in Retail Sales, which rose 5.4% m/m, compared to forecasts for a 1.5% increase. The gains were underpinned by better than expected Manufacturing and Services PMI reports, and by a broad-based US dollar weakness. The intraday technicals are modestly bullish above 1.3830 but need to break above 1.4010 to generate renewed demand.

USDJPY is at the bottom end of its 107.81-108.00 range, with prices weighed down by stalled US Treasury yield price action and new states of emergency announced in Tokyo and Osaka. USDJPY risks an upside retracement if prices cannot break technical support in the 10780-85 area.

AUDUSD and NZDUSD rallied on renewed US dollar selling pressures

USDCAD continues to consolidate losses following the Bank of Canada’s hawkish tilt on Wednesday.

Traders need a fresh incentive to drive prices below support in the 1.2440-60 zone, which may not occur today, especially if US equities resume the decline from yesterday.

The US and Canadian economic calendars are empty.

USDCAD Technicals.

The intraday technicals are bearish below 1.2650, and Wednesday’s outside reversal reinforces the downside. Prices are consolidating in a 1.2460-1.2530 range. Only a break above 1.2650 negates the downside pressure. For today, USDCAD support is at 1.2460 and 1.2440. Resistance is at 1.2520 and 1.2550. Today’s Range 1.2460-1.2530.

Chart: USDCAD 1 hour