April 16, 2020

USDCAD open (6:00 am EST) 1.4105-09    Overnight Range 1.4075-1.4135

  • Weekly US jobless claims 5.24 million, close to consensus forecast
  • US COVID-19 cases still rising even as Trump wants to reopen economy
  • WTI oil consolidating losses just above this week’s low
  • US dollar pares overnight gains after Jobless Claims data

Chart: Currency gain/loss (%) against the US dollar from NY close to NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:  The US dollar had a bid tone in a choppy overnight session, but pare its opening gains following the release of the weekly jobless claims report.  Traders are focusing on easing coronavirus restrictions.  Italy has lifted some restrictions for retailers, Spain has allowed construction and manufacturers to return to work, and Germany is allowing small stores and car dealers to reopen. President Trump is expected to announce guidelines for reopening the US economy  today, despite  rising death totals.

Chart: US COVID-19 data as of 5:33 am, April 16,2020

Source: coronamap.org

Bloomberg reports that the COVID-19 outbreak proved lucrative for banks, even though many traders were working from home.  JPMorgan, Bank of American, Citigroup, and Goldman Sachs made a combined $22.7 billion in the quarter. Price volatility begets huge bid-ask spreads, which provides ample room to mark-up trades, much to the delight of the bankers.

Oil prices were slammed yesterday when the US Energy Information Administration (EIA) reported crude inventories surged 19.2 million barrels in the week ending April 10.  Prices are consolidating losses just above yesterday’s low, trading in a $19.80-$20.50 range overnight. Weak global demand will keep them depressed.

EURUSD traded quietly in a 1.0860-1.0910 range.  Prices were lifted off the low after ECB President Christine Lagarde said they were fully prepared to increase the quantitative easing program. Eurozone data was a non-event.

GBPUSD was on the defensive overnight, falling from 1.2525 to 1.2460.  Prices are weighed down by the impact of COVID-19 in the UK and by fresh concerns surrounding the UK/EU trade talks, with three weeks of talks beginning April 20.

USDJPY traded with a bullish bias in Asia until just before Europe opened when prices started to slide, opening in NY, in the middle of the 107.42-108.07 range.

AUDUSD and NZDUSD dropped in Asia, despite Australia reporting better than expected employment data.  Prices recovered slowly in Europe and both currency pairs opened in New York with just small losses compared to Wednesday’s close.

USDCAD opened unchanged this morning after yesterday’s sharp rally, which took prices from 1.4015 at the NY open to 1.4135 overnight.  Yesterday’s Bank of Canada meeting was notable because they decided to dispense with forecasts and settled with providing a range of guesses.  Inflation is expected to fall to zero, which Governor Poloz says will be transitory.  The BoC announced expanded QE measures, including raising its bond auction purchases to 40% along with a new Provincial and corporate bond buying program.  FX traders didn’t care as all the G-7 economies are in the same boat.

USDCAD technical outlook:

 The short term USDCAD technicals are bullish with yesterday’s break above 1.4010 (daily chart) which suggests further upside to 1.4350.  A move below 1.4010 would suggest the move above 1.4080 was a false-break and re-open the door to a drop to 1.3860.  For today, USDCAD support is at 1.4080 and 1.4010. Resistance is at 1.4150 and 1.4260.  Today’s Range 1.4060-1.4160

Chart: USDCAD daily

Source: Saxo Bank