Source: Wikimedia

March 14, 2022

  • Russia and Ukraine peace talks progress fades
  • New COVID-19 outbreak makes China lockdown 17.2 million
  • US dollar opens mixed, CAD outperforms

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2750-54, overnight range-1.2732-1.2788, close 1.2747

USDCAD traded sideways as shifting risk sentiment outlooks competed for dominance. Reports that Russia and Ukraine peace talks were ongoing with the Ukrainian side noting “some progress,” were offset by news of another nasty coronavirus outbreak in China resulting in authorities in Shenzhen locking down 17.2 million people. Ontario’s unelected health bureaucrats smiled and said “well-done.”

USDCAD ignored oil price action. WTI dropped from Friday’s close of $109.09/barrel to $103.48/b in nearly NY trading, mainly due to profit taking, although peace-talk chatter helped.

USDCAD continues to see lingering downward pressure from Friday’s stellar employment report. Canada added 336,600 jobs and the unemployment rate fell to 5.5%, enough to ensure the BoC remains hawkish.

This week, all eyes will be on Wednesday’s FOMC meeting and the expected 0.25% rate hike.

The Canadian data calendar is empty.

USDCAD technical outlook

The intraday USDCAD technicals are bearish following the break below 1.2790, March uptrend line and are looking for a move below 1.2680 to extend losses to 1.2600.  A move above 1.2800 targets 1.2860 and then 1.3000.  Nevertheless, there is no evidence that the 1.2600-1.2900 range will break anytime soon.

For today, USDCAD support is at 1.2730 and 1.2680.  Resistance is at 1.2805 and 1.2840. Today’s Range 1.2710-1.2790.

Chart USDCAD hourly

Source: Saxo Bank

G-10 FX recap and outlook

The clock’s turned ahead in most of Canada and the US, giving traders an earlier start to the trading week.  Risk sentiment is conflicted with a massive COVID outbreak in China, competing with rumours of peace-talk progress between Russia and Ukraine against the FOMC meeting backdrop.

Traders are keeping are also keeping a close watch on US-China relations after the Washington Post reported that Russia asked China for military equipment and other assistance.

Russia denied the news and also said that its plans for Ukraine will continue as scheduled, which put a dent in positive risk sentiment.

The coronavirus outbreak in China crushed Chinese equity indexes, but Japanese and Australian indexes didn’t seem overly concerned.  The Nikkei 225 closed with a gain of 0.50% while the ASX 200 finished with a gain of 1.21%., European equity traders surged higher on the back of peace talk progress led by a 2.90% jump in the German Dax index before the latest Russia comments erased half of the gains.   S&P 500 futures rose 0.40% down from their earlier peak of a 0.94% gain. Oil prices dropped 4.7%, while gold prices shed 0.90 %.  The US 10-year yield jumped to 2.10% after closing Friday at 2.006% but slipped to 2.07% (as of 5:45 am PT).

EURUSD opened in Asia at the bottom of its 1.0902-1.0989 range and climbed steadily.  Prices were supported by the improved risk-sentiment tone and expectations for more hawkish posturing by the ECB, who last week announced the PEPP program would end in March rather than December.  However, the Russian/Ukraine war and fears of Euro-area economic damage will likely keep the EURUSD downtrend intact below 1.1100.

GBPUSD climbed to 1.3056 from 1.3011 on improved risk sentiment.  The Bank of England is expected to raise interest rates by 0.25% at Thursday’s monetary policy meeting, which also underpins prices.

USDJPY surged from an Asian low of 117.32 to 118.05 in NY due to soaring US Treasury yields and an improvement in risk sentiment.

NZDUSD outperformed against its AUDUSD cousin.  The Kiwi rallied due to expectations that economic growth will be higher than expected when GDP is reported on Thursday, forcing the RBNZ to raise interest rates more aggressively than previously expected.  NZDUSD rose for 0.6776 to 0.6812.

There are no special US economic reports today.

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3506 previous 6.3306

Shanghai Shenzhen CSI 300 fell 3.06% to 4,174.76

Chinese stocks were hammered after authorities locked down 17.2 million people in Shenzhen for one week, which includes the suspension of public transportation services. All indoor dining and entertainment venues were closed, and people were told to work from home.

Chart: China 1 month

Source: Saxo Bank