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March 18, 2022

  • US and China Presidents talk by phone today
  • Canada Retail Sales higher than expected
  • US dollar on the defensive on improved risk sentiment

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2618-22, overnight range-1.2597-1.2634, close 1.2629

USDCAD traded lower overnight, supported by steep rise in oil prices from Wednesday.  WTI oil climbed from $95.30/barrel to $106.22/b overnight, a continuing reaction to the International Energy Agency (IEA) prediction an oil supply crisis from the loss of Russian crude.

US President Biden and UK Prime Minister Boris Johnson asked Saudi Arabia and UAE, respectively, to raise oil production. Both leaders were told to “pound sand,” figuratively.

USDCAD traders ignored news that Retail Sales rose 3.2% in January compared to the 2.4% expected.  The gain was due to higher vehicle and auto part sales.  The gain was not a surprise as the economy reopened and Omicron restrictions eased.

Traders appear to have gotten over geopolitical and interest rate risks and are focusing on growth prospects in the commodity currency bloc, at least for the moment.

USDCAD technical outlook

The USDCAD intraday technicals are bearish.  USDCAD snapped the March uptrend when prices moved below 1.2740 Wednesday and remain in a downtrend below 1.2640.  USDCAD has significant support in the 1.2550-70 area from previous lows and the uptrend line from June 2021.  The 1.2480-1.2510 area provides another layer of support, with a move below 1.2480 targeting 1.2000.  A break above 1.2660 suggests further 1.2600-1.2900 consolidation.

For today, USDCAD support is at 1.2580 and 1.2550.  Resistance is at 1.2660 and 1.2690. Today’s Range 1.2580-1.2660

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Geopolitical risks, inflation fears, and the prospect of higher interest rates have dominated trading for the past couple of months.  FX and equity traders appear to be “done with it,” and try to convince themselves that the worst is over.

The S&P 500 index is trading a tad higher from where it closed on February 28 despite FOMC policymakers forecasting six more rate hikes before the end of the year.  The so-called “risk currencies” (CAD, AUD, NZD) are the best-performing G-10 majors since the beginning of the month, while the “safe-haven” pairs (CHF, JPY) have sunk.

An undercurrent of positive risk sentiment rippled through markets yesterday and continued overnight after Russia made a debt payment and avoided default.  It’s rather disconcerting to see that a bond payment is considered more important than Russia bombing hospitals and shelters.

China President Xi Jinping is taunting the US by failing to censure Russian aggression, and then by sending an aircraft carrier through the Strait of Taiwan.  President Biden is expected to voice his displeasure at China’s actions and threaten sanctions if China overtly supports Moscow.  China will counter that they will not accept US threats or coercion or US support for Taiwan secession.

EURUSD traded in a 1.1017-1.1118 range with the bottom seen in early in NY trading.  The single currency is suffering from profit-taking ahead of the weekend, and fears of economic fall-out from the Russian aggression in Ukraine.

GBPUSD is trading near the bottom of its 1.3123-1.3189 overnight band due to a mix of disappointment from yesterday’s dovish Bank of England rate hike.

USDJPY is trading near the top of its 118.60-119.24 range supported by the firm US 10-year yield (2.14%) and the “as expected” dovish Bank of Japan outcome.  The BoJ left monetary policy unchanged but said it could ease policy again.

AUDUSD and NZDUSD rallied on the back of higher commodity prices and a better risk sentiment tone.

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3425, previous 6.3406

Shanghai Shenzhen CSI 300 rose 0.62% to 4,265.90

China President Xi Jinping and President Biden chatting by phone today with Biden reportedly taking a hard-line stance over China’s support for Russia.

Chart: China 1 month

Source: Saxo Bank