March 20, 2020

USDCAD open (6:00 am EST) 1.4229-33    Overnight Range 1.4152-1.4535

• Loonie soars on back of oil price surge:  WTI rises 36% from yesterday to today
• Global equity indices rebound with attitude, US futures up 4.25% (6:00 am EDT)
• Softer US Treasury yields knock USDJPY off lofty perch
• California tells 40 million people to stay at home-celebrities will tweet their thoughts and prayers
• US dollar opens with losses across the G-10 spectrum, but is still substantially higher than where it closed on March 13

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: EURUSD and GBPUSD are channelling “Lada vs Hunt.” The price action in the past 24 hours had all the ups and downs of a Formula 1 race.  GBPUSD won.  It rose 1.95% compared to the EURUSD loss of 0.92%.  The GBPUSD rally was fueled by another “emergency” Bank of England rate cut, taking the benchmark rate to 0.10% from 0.25% and adding £200 billion in new quantitative easing.  GBPUSD had dropped from 1.1780 in Asia yesterday to 1.1430 by the New York open.  Prices inched higher throughout the day and accelerated on the BoE news, climbing to 1.18645 overnight

EURUSD tracked the GBPUSD rally. The single currency was underpinned by the earlier news of the ECB’s Pandemic Emergency Purchase Program, a minor US stock market rally and the jump in oil prices.

Chart: EURGBP and GBPUSD 24 hour price action

Source: Saxo Bank

USDJPY extended yesterday’s rally from 109.65, reaching 111.28 in Asia.  Prices tracked  US Treasury yields.  When 10-year Treasury yields dropped from 1.186% in Asia to 0.997% this morning in New York, USDJPY sank to 109.34 before recovering.

AUDUSD and NZDUSD rallied on the back of the retreating US dollar, the jump in oil prices, with a dash of pre-weekend profit-taking thrown in.

Oil prices soared.  WTI climbed to $28.46/barrel from $21.70/b, yesterday on the back of “hope.”  President Trump opined about “intervening “ in the Saudi Arabia/Russia oil price feud and that sparked a fast and furious short-covering rally. Prices have held on to most of the gains in early trading.

The oil price rally was the magic elixir for the beleaguered Canadian dollar.  USDCAD dropped from 1.4604 yesterday morning to 1.4150, in very early New York trading. The Canadian government deficit, which Trudeau once said would balance itself, is poised to blow through $100 billion.  The risk of entrenched budget and trade deficits suggests that USDCAD may be in for a prolonged stay above 1.4000.

Financial markets will remain on edge due to expanding COVID-19 lock-downs, and headlines trumpeting rising infections. FX traders will take direction from Wall Street and oil prices.

USDCAD Technical Outlook

The USDCAD technicals are dubious.  Nevertheless, USDCAD  is in a two week uptrend above 1.4070.  Prices are consolidating in a 1.4150-1.4350 range.  For today, support is at 1.4150 and 1.4070.  Resistance is at 1.4370 and 1.4430. Today’s range 1.4160-1.4350

Chart: USDCAD  4 hour

Source: Saxo Bank