February 9, 2022

  • More soothing words from ECB policymakers
  • Rebounding equities improve risk tone
  • US dollar trading defensively

FX at a Glance

Source: IFXA Ltd/RP

USDCAD Snapshot: Open 1.2684-88, Overnight Range-1.2684-1.2714, previous close 1.2707

The Canadian dollar is the “nowhere man” of currencies and as the Beatles sang in 1965, It is sitting in its nowhere land.  Making all its nowhere plans for nobody.  Doesn’t have a point of view. Knows not where its going to.”

USDCAD is marking time, but with a bid tone, ahead of Thursday’s US inflation report.  December CPI is expected to be 7.3% y/y, and a higher than expected result would encourage speculation that the FOMC raises rates by 0.50% at the March 16 meeting.

USDCAD downside remains supported by firm oil prices. WTI dropped below $90.00/barrel yesterday and prices are consolidating in a $88.64-$89.85/b band.  Prices found a bit of support after the API reported US weekly crude inventories fell 2.025 million barrels in the week ending February 4.

However, the resumption of US and Iran nuclear talks and the latest Energy Information Administration forecast may limit gains. The (EIA) is forecasting 2022 US crude production at 12.0 million b/day compared to 11.2 m b/day in 2021.

The text of BoC Governor Tiff Macklem’s noon hour speech, (The role of productivity in fostering non-inflationary growth.) is released at noon.

Technical view:  USDCAD technicals are unchanged. They are bullish above 1.2650, looking for a break above 1.2800 to shift the focus to 1.300.  A decisive move below the 1.2620-40 area suggest a tetest of the 1.2480-1.2500 zone.

For today, USDCAD support is at 1.2660 and 1.2620.  Resistance is at 1.2750 and 1.2790.  Today’s Range 1.2660-1.2730

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Fed and ECB policymakers are massaging their messaging, which is a soothing balm for edgy investors and FX traders.

Gold prices have climbed steadily since the end of January.  The rally has stalled in part because comments from San Francisco Fed President Mary Daly and Bank of France Governor Francois Villeroy helped improve global risk sentiment.  On Tuesday, ECB President Christine Lagarde appeared to revert to her usual dovish outlook when she repeated that current inflation pressures would subside.  Mr Villeroy seems to agree.  Yesterday he said, “Reactions in recent days may have been very strong and too strong,”

Those comments helped cap Treasury yield gains and gave Wall Street a lift.  Asia equity indexes rallied as well, with Hong Kong’s Hang Seng rising 2.06% and the Nikkei 225 closed up 1.08%.  European bourses are sharply higher, led by a 1.41% jump in the German Dax.  S&P 500 and DJIA futures have risen and indicates a positive open on Wall Street.

Data-wise, it’s a nothing day, and that will be reflected in FX price action.

EURUSD chopped about in a 1.1404-1.1444 band.  Germany’s trade surplus narrowed to €6.8 billion in December as omicron weighed on exports.  The comments from Villeroy and Lagarde put a damper on EURUSD demand and traders are now biding their time until the US CPI data is available.  EURUSD technicals are modestly bullish, but a drop below 1.1390 will negate the outlook and target 1.1250.

GBPUSD traded with a bid tone, rising from 1.3539 to 1.3588, with prices underpinned by expectations for higher UK interest rates.  Traders ignored the news that UK exports to Germany dropped 8.5% in 2021, as COVID is blamed for the shrinkage.

USDJPY climbed to 115.68 from 115.33 on the back of the US 10-year Treasury yield flirting with 1.95%

AUDUSD and NZDUSD are trading at the top of their overnight ranges due to the improved risk tone and by higher commodity prices.

Chart of the Day: Gold (XAUUSD)

Source: MarketWatch

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

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3653, previous 6.3569

Shanghai Shenzhen CSI 300 rose 0.94% to 4652.06

China market regulator setting sights on iron ore market, in attempt to ensure price stability

Chart:  USDCNY one month

Source: Saxo Bank