No Surprise from ECB

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April 22, 2021

ECB leaves policy unchanged

USDCAD consolidates post-BoC losses

US dollar opens close to unchanged

USDCAD open 1.2491-95, Overnight Range 1.2475-1.2511, close 1.2498

FX at a Glance

Source: IFXA/RP

FX Recap and Outlook

The major global equity indexes are in positive territory, US equity futures are flat, gold and oil prices are a touch lower, and 10-year Treasury yields are unchanged.

Geopolitical tension ebb and flow. Russia antagonizes Ukraine and NATO by sailing forty Russian warships and twenty support vessels in the Black Sea. US and Iran tensions have dialed back (somewhat) after reports the US is considering easing oil and financial sanctions.

US weekly jobless claims were better than expected, and better than last week .Claims were 547,00 compared to the consensus forecast of 617,000, and last weeks upwardly revised 586,000 result.

EURUSD is trading at the top of its 1.2023-1.2058 range. The ECB meeting has been anti-climatic. ECB President Christine Lagarde tweaked the economic outlook from risks skewed to the downside to risks are more balanced. The EURUSD technicals are bullish above 1.1990, looking for a break above 1.2070 to extend gains to 1.2150.

GBPUSD rallied at the beginning of the week, then reversed the move yesterday. Prices dropped below the overnight low of 1.3890 to reach 1.3860 in NY trading, in part because of EURGBP demand. Euro area vaccines are rising as the euphoria from UK vaccinations fades leading to EURGBP demand. The intraday technicals suggest the break below 1.3880 puts a target on 1.3800.

USDJPY languished in a 107.83-108.13 range. Prices are weighed down by geopolitical tensions and soft US Treasury yields.

AUDUSD drifted in a narrow 0.7740-0.7763 band and could not gain any traction from the better than expected NAB Business Confidence Survey (actual 17 vs forecast 7). The government of Australia canceled two Victoria State and China Belt and Road deals because they contradicted Australia’s “free and open Indo Pacific” goals. China described the move as “provocative.”

USDCAD remains defensive after prices plunged from 1.2637 to 1.2460 following the Bank of Canada monetary policy announcement. The BoC surprised markets by moving forward, the timing of its first rate hike. For the past six months, the BoC insisted domestic rates would remain unchanged “into 2023.” Yesterday, the timing became the second half of 2022. There is some consolation in that the unreliability of BoC models and forecasts means there is no need to believe the latest forecast.

USDCAD Technicals.

The longer term USDCAD technicals are bearish while prices are below the 1.2700 area looking for a test of 2018 support at 1.2250. In the short term, yesterday’s drop below 1.2560 flipped the intraday technicals to bearish, with a move below 1.2470 targeting 1.2410. For today, USDCAD support is at 1.2470 and 1.2430. Resistance is at 1.2520 and 1.2560. Today’s Range 1.2450-1.2530.

Chart: USDCAD daily