Source: Pixabay

March 25, 2022

  • German IFO Survey weaker than expected
  • Oil prices retreat after EU declines to sanction Russian crude
  • Commodity currency bloc adds to Thursdays gains

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2540-44, overnight range-1.2519-1.2552, close 1.2527

USDCAD continued to slide overnight, until profit-taking took prices from 1.2519, a level last seen January 21, to 1.2542 at the NY open.

USDCAD is under pressure largely because investors believe markets have fully-priced in US interest rates reaching 2.50-2.75% by the end of 2023. If so, stocks can continue to rally and the S&P 500 return to its 4,800 peak seen last year.

The positive risk tone in equities is underpinning commodity prices which are already bolstered by the shock of the Russian invasion of Ukraine. WTI oil has retreated from its $129.60 peak but remains in an uptrend above $93.00/barrel.

WTI fell yesterday when the EU avoided sanctioning Russian crude imports. The media is making a big deal out of Biden’s promise to “strive” to deliver an additional 15 billion cubic meters of Liquified Natural Gas (LNG) to the EU. Impressed? You shouldn’t be. The EU imports 380 million cubic meters of gas per day. The US plan, at best, would cover 40 days supply, leaving the EU in the dark for the other 325 days of the year. The EU needs Russian energy, meaning Putin still has the upper hand.

USDCAD is also under pressure to robust domestic growth, higher commodity prices other than oil, and the prospect of aggressive Bank of Canada rate hikes.

There are no Canadian economic reports but there is a speech by Bank of Canada Deputy Governor Sharon Kozicki about “A world of difference: households, the pandemic and monetary policy.

USDCAD technical outlook

The USDCAD technicals are bearish while below the intraday downtrend line in the 1.2570-90 area and targeting initial support in the 1.2490-1.2510 zone. A break below 1.2440 would extend losses to 1.2290, then 1.1970.  A bounce above 1.2690 negates the downward pressure and targets 1.2800.  Prices are below the weekly downtrend line at 1.2570.

For today, USDCAD support is at 1.2510 and 1.2480.  Resistance is at 1.2570 and 1.2620.  Today’s Range 1.2480-1.2570

Chart: USDCAD weekly

Source: Saxo Bank

G-10 FX recap and outlook

Traders were on full alert as President Biden met with EU and NATO leaders, fearing an escalation of hostilities with Russia. It didn’t happen, giving the so-called risk assets a green light to rally.

Asian equities closed on a mixed note again. The Nikkei and ASX 200 inched higher while Chinese indexes traded lower, spooked by surging COVID cases in Shanghai. European bourses turned positive in early NY trading, albeit without much conviction. S&P 500 futures fully recouped overnight losses and suggests a positive open on Wall Street. Gold prices are close to unchanged from yesterday’s close, while oil prices are lower. The US 10-year Treasury yield is unchanged at 2.37%.

EURUSD was rather dull, see-sawing in a 1.0996-1.1037 band. Sharply weaker than expected German IFO data was ignored as it was all due to the Russia/Ukraine war.  The single currency needs to reclaim territory above 1.1100 or risk a drop to 1.0900.

GBPUSD rose than sank in a 1.3161-1.3224 band with the peak seen in Asia.  Traders ignored UK Retail Sales, which was below the consensus forecast, dropping 0.3% m/m in February.  However, GBPUSD is in a minor uptrend above 1.3140.

USDJPY is trading at 121.77 in NY after a choppy 121.19-122.43 overnight session. BoJ Governor Kuroda did not seem alarmed by the JPY’s weakness as he attributed it to Japanese importers US dollar demand.

AUDUSD climbed from 0.7497 to 0.7436 due to improved risk sentiment and firm commodity prices. NZDUSD tracked AUDUSD higher

The Michigan Consumer Sentiment index is ahead (forecast 59.7). 

Chart of the day- USDJPY daily

Source: Saxo Bank

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

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3739, previous 6.3640

Shanghai Shenzhen CSI 300 fell 0.59% to 4,174.57

Chart: China 1 month

Source: Saxo Bank