Source: IFXA Ltd/RP
FX Recap and Outlook: When E.F. Hutton and Jay Powell speak, people listen. The difference is Mr Hutton’s audience is given clear direction. The Fed Chair managed to upset markets, and it wasn’t because he said anything new.
It was what he didn’t say, that sent Treasury yields soaring, equity markets plunging and sparking a rush into US dollars.
Traders and analysts were expecting Mr Powell to push back against the surge in Treasury yields, but he didn’t. Instead, he repeated the Fed mantra that the Fed was “ a long way from its goals of maximum employment and inflation averaging 2% over time.”
Asia equity indexes closed with losses and the major European indexes are lower, except for the UK FTSE 100, which is modestly higher. S&P 500 futures are unchanged. Gold closed below $1700.00 support, and oil prices rose after the Opec decision.
China’s leadership announced a 2021 GDP target of 6.0%. Many analysts suggest it is low. China said they would oppose separatist activity in Taiwan, obviously forgetting that Taiwan is already an independent state.
US Nonfarm Payrolls rose 379,00, easily beating the 182,000 forecast and blasting the US dollar higher in the process. The increase puts Mr Powell’s stand pat stance in a bad light, as it suggests the Fed’s patience will be tested.
EURUSD broke support at 1.2020 after Powell’s remarks, and the level hasn’t been seen since. The single currency traded in a 1.1916-1.1976 range overnight. Selling pressure stemmed from the unwinding of stale long EURUSD positions and bearish technicals. Widening yield differentials between US Treasuries and Bunds is also undermining the currency pair.
GBPUSD plunged from 1.3905 to 1.3793 due to widespread US dollar demand and the flushing out of stale long GBPUSD positions. The short term technicals are bearish, looking for a test of support in the 1.3720 zone.
USDJPY rallied from 107.83 to 108.55. Bank of Japan Governor Kuroda is not concerned about rising US Treasury yields. He said it wasn’t necessary to widen the band around the BoJ’s long term target.
AUDUSD and NZDUSD were thoroughly thrashed with the surge in the US dollar. AUDUSD technicals are targeting 0.7560 following the break of support at 0.7740.
Opec and Russia agreed to leave production unchanged through April. Saudi Arabia also left it’s voluntary 1.o million/barrel/day cut unchanged. Canadian producers got into the act as Suncor, Syncrude and Canadian Natural Resources shut down production for 30 days for maintenance. WTI rose to $65.53 from a low of $60.50 yesterday.
USDCAD rallied due to broad US dollar demand, but the sharp rises in oil prices meant it greatly outperformed against AUDUSD and NZDUSD.
Canada Merchandise Trade surplus was $1.48 billion in January compared to Decembers deficit of $1.98 billion.
USDCAD Technicals: The intraday USDCAD technicals are bullish while prices are above 1.2650. However, the downtrend from the March 2020 peak is intact below 1.2750. A decisive topside break would shift the focus to 1.3000 For today, USDCAD support is at 1.2650 and 1.2610. Resistance is at 1.2750 and 1.2780. Todays Range 1.2650-1.2750
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank