January 9, 2020

USDCAD open 1.3047-51 (6:00 am EST)  Overnight Range 1.3028-1.3071

It’s all rainbows and unicorns for global markets.  The weekend US drone strike that killed Irani General Soleimani touched off “end of the world fears” at the beginning of the week have disappeared, thanks to Iran’s tepid retaliation and President Trump’s comments, yesterday.  He said he was “ready for peace” among other things, and traders liked what they heard. 

Safe-haven trades were unwound.  The Japanese yen and Swiss franc sank like stones. USD Treasury yields soared, along with Asia and European equity markets. 

The US dollar extended yesterday’s gains led by a 0.35% drop in the British pound.

FX Market Snapshot

Change in currency value against the US dollar from NY close to  NY  open (6:00 am EST)

Source:  Saxo Bank/IFXA        

GBPUSD plunged following dovish comments by Bank of England Governor Mark Carney. He said that the BoE discussed the idea of near-term stimulus, pointing out that they have room to nearly double asset purchases which would be the equivalent of a 1.0% cut in the overnight rate. Those comments and ongoing uncertainty about Brexit drove GBPUSD from 1.3122 in Asia to 1.3020 in early New York trading. The intraday GBPUSD technicals are bearish below 1.3110 looking for a break of support at 1.3020 to extend losses to 1.2960.

EURUSD traded sideways in Asia then traded lower in Europe following weak-to-mixed German economic data. Prices were also weighed down by pending option expiries with sizable strikes sitting in the 1.1090-1.1125 area. The technicals are bearish below 1.1170 and targeting a test of the 1.1070 zone.

USDJPY continues to climb, fueled by a rebound in US 10-year Treasury yields, which jumped from 1.71%, January 7, to 1.872% in New York today. The improved tone to risk sentiment on the easing of US/Iran tensions underpinned the gains. The intraday USDJPY technicals are bullish while prices are above 108.80 targeting a break of 109.70 to extend gains to 111.10

AUDUSD sank under the weight of broad US dollar demand against the G-10 majors, concern about the economic impact from the wildfires and the Reserve Bank of Australia’s dovish monetary bias.

WTI oil prices have plunged 9.5% since Wednesday with yesterday’s EIA report of a 1.6 million barrel increase in US crude inventories exacerbating the drop. Nevertheless, lingering uncertainty around with US/Iran relations and the Opec production cuts, leave the WTI uptrend intact while prices are above $59.30/barrel

USDCAD inched higher overnight, supported by broad US dollar gains and the steep plunge in oil prices.  Today’s weaker than expected November Building Permits data (actual -2.4% vs forecast 1.0%) combined with the modestly better than forecast US jobless claims data, gave USDCAD an added boost but prices remain below downtrend resistance in the 1.3080-90 area.

Bank of Canada Stephen Poloz’s comments at the Vancouver Board of Trade Economic forum may provide fresh insight into the Bank’s monetary policy outlook.  The intraday technicals are bullish while prices are above 1.3010 but need to extend gains above 1.3090 to negate short-term downward pressure.1.3060. Today’s Range 1.3010-1.3090

Chart: USDCAD 1 hour

Source:  Saxo Bank