Source: Wikipedia

June 22, 2021

European equity rebound stalls; Wall Street futures flat

Fed Chair Powell’s opening testimony to Senate publish on Fed website

US dollar retreat stalls,

USDCAD open 1.2386-90, Overnight range 1.2361-1.2390,  Previous close 1.2364

FX at a Glance

FX Recap and outlook

Fed officials are chirping up a storm.  NY Fed President John Williams said it was not the right time to change monetary policy.

He said, “It’s clear that the economy is improving at a rapid rate, and the medium-term outlook is very good,” but the data and conditions have not progressed enough for the Fed to shift its monetary policy stance of strong support for the economic recovery,”

His remarks contrast with his colleagues, Dallas Fed President Robert Kaplan, and St Louis Fed President, James Bullard who believe it’s time to start adjusting economic support.  However, they are not voters.

Fed Chair Jerome Powell appears to agree with Mr Williams.  Mr Powell’s prepared remarks to the Senate Subcommittee on the Coronavirus Crisis were on the Fed website, ahead of his 2:00 pm testimony.

He will tell the Committee that the economy has shown sustained improvement and that “inflation has increased notably in recent months.” He attributes the inflation rise to base effects, the pass-through of past increases in oil prices to consumer energy prices, the rebound in spending as the economy reopens, and supply bottlenecks.  He said all  of the above are transitory supply effects that, as they abate will drive inflation toward “our longer-run goal.”

Asia equity indexes closed sharply higher except for the Hong Kong Hang Seng Index which lost 0.63%.

European bourses are flat to lower, and S&P 500 futures are unchanged.  10-year Treasury yields rallied from 1.42% to 1.50% before easing to 1.47%.  Crude and gold prices are down modestly.

EURUSD chopped lower, falling from 1.1919 to 1.1882 in early NY trading.  Divergent central bank monetary policies weigh down the single currency.  The FOMC forecast for two rate hikes in 2023 contrasts with the dovish ECB outlook.

Yesterday, ECB President Christine Lagarde spoke about lowering rates, saying the “ECB has room to cut rates if necessary.” Today, Finland Central Bank President and ECB Board Member Olli Rehn said monetary stimulus was still needed in the Euro area.  The intraday EURUSD technicals are bearish below 1.1920, looking for a move below 1.1840 to target 1.1750.

GBPUSD was on the defensive, dropping from 1.3936 in Asia to 1.3860 just as NY opened.  Prices are tracking broad US dollar sentiment, although positioning ahead of the Bank of England meeting Thursday is playing a role.

The intraday technicals are bearish below 1.3810, looking for a break below 1.3840 to target 1.3790.

USDJPY inched higher, rising from 109.71 yesterday to 110.52 in Europe, in part due to the rebound in 10-year Treasury yields from 1.37% yesterday to 1.50% overnight.

AUDUSD and NZDUSD are close to the middle of their overnight ranges.  Price action is tracking US dollar sentiment, but both currency pairs are suffering from softer commodity prices.

USDCAD has whipsawed around US rate-hike fever, and Treasury yield swings.  Surging oil prices which saw WTI oil rise to $73.79 served to reinforce Canada’s modestly bullish fundamental picture.  Oil prices have gotten a bit of a boost from a report from Bank of America Global Research forecasting Brent crude (currently $74.50/barrel) rising to $100.00/b.

Today’s data consists of US Existing Home Sales and Richmond Fed Manufacturing Index.

USDCAD technical outlook

The intraday USDCAD technicals are bullish above 1.2250 but the downtrend from November 2020 is intact while prices are below 1.2500.  For now, USDCAD is likely to consolidate gains in a 1.2340-1.2440 band.  For today, USDCAD support is at 1.2340 and 1.2310.  Resistance is at 1.2410 and 1.2440.   Today’s range 1.2340-1.2410.

Chart USDCAD 4 hour

Source: Saxo Bank