February 4, 2020

USDCAD open (6:00 am EST) 1.3280-84   Overnight Range 1.3269-1.3300

Positive risk sentiment returned to markets fueled by yesterday’s modest Wall Street rebound which sparked gains in Asia and European equity indices.  However, the DJIA’s 0.51% gain still left the DJIA down 1.5% between Friday and Monday. Talk that Opec and Russia are considering additional production cuts underpinned prices as did positive press reports on China’s efforts to contain the coronavirus.

China announced that there are 20,438 confirmed coronavirus cases and a death toll of 425. 

The US dollar closed with gains across the board yesterday, and opened on a mixed note. EUR, JPY, and CHF were lower, AUD was higher, while CAD, NZD, and GBP were unchanged.

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

Source: Saxo Bank/ IFXA Ltd

GBPUSD was the big mover again, trading in a 1.2943-1.3024 range before beginning the New York session, just about where it closed. Yesterday’s comments from EU officials and UK Prime Minister Johnson on the upcoming trade negotiations suggested the talks will be somewhat acrimonious. GBPUSD bottomed out just as Europe opened. Better-than-expected UK construction PMI data (Actual 48.4 vs previous 44.4) helped lift prices to the 1.3000 area.

EURUSD consolidated Monday’s losses in a narrow 1.1050-1.1063 range. Yesterday’s robust US ISM Manufacturing data (Actual 50.9 vs forecast 48.5) and the rebound in global equity markets led to EURUSD selling as safe-haven trades were unwound.  Eurozone December PPI data was flat, and not a factor.

USDJPY climbed steadily, rising from 108.56 to 109.12, supported by the improved tone to risk sentiment, firmer 10-year US Treasury yields which rose from 1.52% to 1.56%, and broad US dollar demand. Bank of Japan Governor Kuroda said the BoJ would ease policy if needed, but it was too early to tell.

AUDUSD got a double boost from the better risk tone and the Reserve Bank of Australia. The RBA left rates unchanged. A large segment of traders expected a rate cut because of the economic impact of wildfires and coronavirus. It didn’t happen.  AUDUSD rallied from 0.6680 to 0.6730.

WTI oil prices climbed from $49.68/b to $50.76/b on reports Russia will support Opec. There are other rumours that the cartel is planning another crude production cut of up to 500,000 barrels/day.

USDCAD direction is at the mercy of broad US dollar sentiment and WTI price swings with prices underpinned by the Bank of Canada’s dovish monetary policy bias. Traders are looking ahead to Wednesday’s Trade data and Friday’s employment report.

US Factory orders are on tap today. 

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish above 1.3230 looking for a test of resistance at 1.3330, and supported by the January uptrend line that comes into play at 1.3110. For today, USDCAD support is at 1.3230 and 1.3205. Resistance is at 1.3300 and 1.3350. Today’s Range 1.3230-1.3330

Chart: USDCAD 4 hour

Source: Saxo Bank