USDCAD open (6:00 am ET) 1.2787-91, Overnight Range 1.2765-1.2795, Previous Close 1.2784
FX Ranges at a Glance:
FX Recap and Outlook: US stimulus package hopes are stimulating equity markets. Tokyo stocks led the major Asia equity indexes higher, (except China) powered by US earnings reports and talk of a $1.3 trillion stimulus package compromise. European stock markets are higher, and Wall Street will open mixed. The DJIA is flat while S&P 500 futures are modestly higher. Gold and oil prices are posting gains.
ADP employment data showed private sector employment rising 174,000 in January, with the improvement concentrated in the Service sector.
EURUSD continues to trade with a negative bias. Prices bounced between 1.2010 and 1.2049 overnight, and they opened in NY at 1.2021. Eurozone data was better than expected, but still reflected a weak economy and was ignored. January rose 0.9% y/y (forecast 0.5%), December Producer Prices were -1.1% y/y (forecast -1.2%), and Services PMI was 45.4 compared to 45.0 last month. EURUSD will continue to drift toward the 1.1990-1.2000 area due to sizeable option trades expiring at 10 am ET.
Former ECB President Mario Draghi is credited with saving the Euro in July 2012 after he famously said: “we will do whatever it takes.” Italy President Sergio Mattarella hopes Mr Draghi can work a similar miracle. The President is in talks with Mr Draghi to see if he is interested in forming a new government. EURUSD technicals are bearish looking for a break below 1.2010 to extend losses to 1.1920.
GBPUSD failed to extend gains beyond the 1.3680 area twice overnight. UK January Services PMI was 39.5, which beat the forecast but is still very weak, thanks to the effects of lockdowns. Prices will continue to trade erratically until the Bank of England meeting tomorrow.
USDJPY is at the top of its 104.93-105.10 range and trading with a bid. Prices are supported by steady US 10-year yields, at 1.11%, and bullish technicals looking for a test of 105.50. Bank of Japan Deputy Governor put a damper on expectations for a policy overhaul at the March meeting. He said, “there is nothing wrong with BoJ’s basic policy direction and the economy is picking up as a trend although is in a severe situation due to the pandemic.”
NZDUSD rallied from 0.7155 before the NY close to 0.7223 in early Asia trading after a better than expected NZ employment report. The unemployment rate dropped to 4.9% from 5.3% Prices also got a bit of a lift from the China Caixin Services PMI index, which was higher than expected.
AUDUSD got a lift from RBA Governor Phillip Lowe who suggested Australian monetary policy will be unchanged for some years. He said “It is going to be some years before the goals for inflation and unemployment are achieved. So, it is premature to be considering withdrawal of the monetary stimulus.” Yesterday AUDUSD was sold because the RBA statement was considered dovish. Today, AUDUSD is bought because the governor’s monetary outlook is dovish. It is a tad perplexing.
USDCAD traded in a narrow range. It found a bottom in Asia and is trading at the top of the 1.2765-97 range in NY. Prices are getting a bit of support from WTI oil which is trading at 55.14/barrel. However, the prospect of US dollar gains against the G-10 majors will keep USDCAD on the defensive today.
There are five Fed speakers today (Bullard, Harker, Mester, Evans, and Kaplan) as well as ISM Services PMI data.
USDCAD Technicals: USDCAD tested the uptrend line from January 20, in the 1.2770 area and it held. A break above resistance in the 1.2805 area sets the stage for a retest of resistance in the 1.2880-90 zone. For today, USDCAD support is at 1.2770 and 1.2740. Resistance is at 1.2830 and 1.2890 Today’s Range 1.2770-1.2840
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank