- Month-end, quarter-end flows distort market activity
- Third-wave COVID-19 fears amidst rising Treasury yields
- Commodity currency bloc flat as US dollar grinds higher
USDCAD open (6:00 am ET) 1.2584-88, Overnight Range 1.2583-1.2634, Close 1.2590
FX at a Glance
Source: IFXA Ltd/RP
FX markets were on edge when they opened in NY today. The US dollar index cracked above 93.00, a level last seen in November 2020. US Treasury yields were posting a new cycle high of 1.771% due to a combination of quarter-end rebalancing flows and inflation concerns from recent and planned US stimulus program. US coronavirus rose 12% in the past week, even as Biden promises 200 million vaccines by April.
EURUSD traded defensively in Asia, the dropped in Europe, falling from an overnight peak of 1.1774 to 1.1734. The rise in Treasury yields, combined with perceived US economic outperformance compared to the EU, weighs on prices. Traders ignored better than expected Eurozone economic data, including a jump in the ESI Sentiment indicator to pre-pandemic levels. EURUSD has been sliding since the middle of March and may be due for a bounce.
GBPUSD traded in a tight 1.3744-1.3782 range. The euphoria over the UK’s stellar COVID-19 vaccination program is fading but GBP is benefitting from EURGBP selling. UK data and recent comments from Bank of England officials have been positive suggesting the downside is limited. The intraday technicals are bullish above 1.3730 looking for a break above 1.3790 to extend gains to 1.3880.
USDJPY soared above 110.00 and touched 110.37 in early NY trading. The move was powered by the jump in US Treasury yields, and rebalancing flows for Japanese year end which is March 31. Japan’s unemployment rate was unchanged at 2.9%. Retail Trade data was weak, better than expected.
AUDUSD and NZDUSD gave up Asia gains and dropped steadily due to broad US dollar strength. Month end and quarter end portfolio rebalancing flows may slow further losses.
USDCAD demand due to US dollar strength against the majors is being offset by the combination of steady to firm oil prices, and an optimistic outlook for the domestic economy. Talk that the Bank of Canada may announce the start of QE tapering at the April 21 monetary policy meeting is also helping to cap topside moves.
USDCAD Technicals: The intraday technicals are bullish above 1.2570 but prices need to decisively break above 1.2630 for the rally to be anything more than a correction. A break below 1.2550 would negate the upward pressure and extend losses to 1.2470. For today, support is at 1.2550 and 1.2510. Resistance is at 1.2630 and 1.2650. Todays Range 1.2560-1.2630
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close