May 14, 2020

USDCAD open (6:00 am EST) 1.4070-73   Overnight Range 1.4072-1.4114

  • US Jobless Claims rise 3 million, underpin greenback
  • Fed Chair Powell “The Committees view on negative rates has not changed.”
  • Risk sentiment turns negative-global equity indexes follow Wall Street lower
  • Oil prices surge
  • CAD and JPY gain against US dollar, the rest of the majors retreat

Percent change in value of Currency vs US dollar-NY close to NY open

Source: Saxo Bank/IFXA

FX Recap and outlook: The weekly US Jobless Claims report was a tad disappointing.  Claims increased 2.981 million, a touch higher than the 2.5 million forecast.  The US dollar was bid going into the release and stayed bid afterwards as traders continued to digest Fed Chair Powell’s speech, yesterday.

Mr Powell’s speech which was titled “Current Economic Issues,” by buying US dollars, bonds and by selling stocks. The Fed Chair shrugged off President Trump’s call for negative interest rates when he responded to a question saying “The Committee’s view on negative rates has not changed.  He argued that the government could do more suggesting “additional fiscal support could be costly, but worth it if it helps to avoid long-term economic damage and leaves us with a stronger economy.” In a nutshell –“We’ve done our job, Mr Trump, do yours.”

EURUSD is trading at overnight session lows in NY having fallen from 1.08232 to 1.0783. Falling Eurozone stock indexes, weak economic data from Germany and risk-aversion demand for US dollars is weighing on the currency.  However, traders are cautious ahead of today’s US weekly jobless claims data.

The Pound got pounded.

GBPUSD fell from 1.2460 on Monday to 1.2183 overnight and is just above the low in NY.  Comments from Bank of England Deputy Governor Ben Broadbent hinting at negative rates on Tuesday, a worsening outlook for the UK economy, concerns about UK/EU trade talks, and bearish technicals are weighing on prices.

Asia equity markets followed Wall Street lower, and FX traders bought US dollars.  The antipodean currencies dropped with the AUDUSD decline exacerbated by record Australian job losses. Australia lost 594,300 jobs in April, and the unemployment rate rose to 6.3%.

USDJPY tumbled 106.79 before recovering to 107.05 in NY.   Safe-haven demand for yen, the 1.74% drop in the Nikkei 225 index, and another drop in US Treasury yields fueled the sell-off.

Oil prices rallied. WTI climbed from $25.94 at the NY close to $27.10 in early NY, before profit-taking drove prices to $26.70/barrel.  The rally was supported when the International Energy Agency (IEA) said: “Global oil supply is set to fall by a spectacular 12 mb/d in May to a nine-year low of 88 mb/d, as the OPEC+ agreement takes effect and production declines elsewhere.”  Yesterday’s surprise decline in US weekly crude stocks as reported by the EIA underpinned prices.

USDCAD traders are ignoring the surge in crude prices and are content to track broad US dollar sentiment.

That sentiment is bullish US dollars and prices are flirting with resistance from the March downtrend line which comes into play in the 1.4120-30 area.

Bank of Canada Governor Stephen Poloz holds the final press conference of his tenure when the Financial System Review report is released today.

USDCAD technical outlook

The intraday USDCAD technicals are bullish while above 1.4060 looking for a break of downtrend resistance and an hourly double top at 1.4130 to extend gains to 1.4160.  A break below 1.4060 targets 1.3960. The longer term daily chart is bullish above 1.3920.  For today, USDCAD support is at 1.4060 and 1.4005. Resistance is at 1.4130 and 1.4190. Today’s Range 1.4040-1.4140

Chart: USDCAD daily

Source: Saxo Bank