May 1, 2020
USDCAD open (6:00 am EST) 1.4026-30 Overnight Range 1.3937-1.4042
- Quiet overnight session thanks to May 1 holidays in Asia and Europe
- Risk sentiment sours on Trump threats to China, and equities
- US dollar opens on a mixed note-higher vs commodity currency bloc and lower against Europe
Change in currency value vs US dollar NY close to NY open
Source: Saxo Bank/IFXA
FX Recap and outlook: May marched in with a defensive goose-step, thanks to President Trump. He blames China for withholding coronavirus information and is reportedly discussing measures to hold China accountable, which may include allowing the US government or individuals to sue China. Australia Prime Minister Scott Morrison called for an investigation into the cause of the virus.
Sentiment was already turning negative after Thursday’s US Jobless Claims report which pegged the six-week total of job losses around 30.3 million. Wall Street closed in negative territory, but the Dow Jones Industrial Average still rose an impressive 16.2% in April.
EURUSD traded sideways in Asia but firmed in Europe, despite most of Europe on May Day vacation. The ECB left interest rates unchanged and tweaked the terms of its existing refinancing operations. The news underpinned the single currency which rose from 1.0832 yesterday, to 1.0986 by the NY open today.
GBPUSD tracked EURUSD moves on Thursday but underperformed overnight, slipping from 1.2595 to 1.2535, before bouncing to 1.2557 at today’s open. GBPUSD suffered as the FTSE 100 index tumbled 2.0%, undermined by layoff announcements from Ryanair and an £800, COVID-19 driven, write-down by Royal Bank of Scotland. UK Nationwide House Price Index and Markit Manufacturing PMI data was ignored.
USDJPY is well on its way to retracing 100% of yesterday’s rally. Prices climbed from 108.46 yesterday morning to 107.46 in the late afternoon, and then slipped steadily to open at 106.77 today.
AUDUSD was the biggest loser overnight, falling 1.1% on the back of renewed risk-aversion sentiment.
The Australia/China coronavirus tiff didn’t help, nor did the break below 0.6465, the AUDUSD uptrend line from March, which flipped the technical outlook to negative. NZDUSD tracked AUDUSD lower, although its short-term technicals are still bullish.
Oil prices are retracing yesterday’s gains. Yesterday, a Reuters survey estimated Opec pumped 30.25 million barrels/day in April, 1.61 million bpd than in March, even as prices plunged and storage became scarce.
The WTI June contract traded in a $18.10-$20.42/barrel range overnight and is trading at $18.87/b in NY as of 07:00 am EDT.
Fading the Loonie rally, suggested yesterday proved to be a lucrative idea. USDCAD rallied 1.36% since Thursday morning as month-end demand for Canadian dollars evaporated, oil prices retreated, and risk sentiment turned negative. The failure to break below 1.3850 and the subsequent push above 1.3980 turned the short-term technicals bullish.
US ISM Manufacturing PMI (forecast 36.9 vs March 49.1) is on tap today.
USDCAD technical outlook:
The intraday USDCAD technicals are bullish following the break above 1.3980. A break above 1.4060 will extend the gains to 1.4170. For today, USDCAD support is at 1.3980 and 1.3940. Resistance is at 1.4060 and 1.4105 Today’s Range 1.3990-1.4070
Chart: USDCAD 4 hour
Source: Saxo Bank