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July 30, 2020

USDCAD Open (6:00 am) 1.3407-11,  Overnight Range: 1.3336-1.3431

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 Source: Saxo Bank/IFXA Ltd

FX Recap and outlook:  Today’s dose of economic data was as ugly as expected.  US Q2 GDP plunged 32.9% y/y a touch better than the -34.1% predicted but still confirms the economic devastation caused by measures to combat the COVID-19 pandemic.  The rise in weekly jobless claims from 1.422 million to 1.434 million warns that the recent surge in coronavirus cases is taking a toll on workers.

Even though the news was expected, risk sentiment has taken a turn for the worse, which started after yesterday’s Fed meeting. US equity futures point to lower open on Wall Street.

The Federal Open Market Committee (FOMC) meeting statement had a few tweaks that emphasised their dovish stance. They repeated that the ongoing public health crisis would weigh heavily on the economy, and acknowledged concerns about the uptick in new cases.  They said, “The path of the economy will depend significantly on the course of the virus.”  And just in case people were concerned about interest rates moving higher, Mr Powell said: “ we are not even thinking about interest rates.”

The dovish result was expected, and the US dollar slid into the close.  FX markets were steady in Asia, although oil prices and gold traded with a negative bias.  WTI suffered from Wednesday’s EIA report that US crude inventories rose by 10.6 million barrels in the week ending July 24.

EURUSD is trading in the middle of its overnight 1.1732-1.1792 range.  Weak German Q2GDP (-10.1 q/q) knocked prices from the top, but it the single currency is well-above this weeks low of 1.1642 in Asia on Monday.

GBPUSD  slumped to  1.2946 in Asia, then soared to 1.3026f in NY trading, following the German GDP data.  EURGBP selling  fueled the rally. GBPUSD is holding those gains in early NY trading, in part due to month end demand.

USDJPY is trading just below the overnight peak, although the technicals are still bearish.  A drop in US 10-year Treasury yields to 0.558% is weighing on prices.

AUDUSD and NZDUSD suffered from the shift into negative risk sentiment with soft  Australia building permits data, not helping.

USDCAD rallied alongside the drop in the antipodean currencies.  The failure to extend losses below 1.3330 this weak, and a rise in negative risk sentiment, boosted prices.   USDCAD continues to be at the mercy of broad US dollar sentiment.  Some analysts are suggesting that all the good news is already priced into the currency, leaving limited USDCAD downside in the coming weeks.

USDCAD Technicals:   The intraday USDCAD turned bullish with the break above 1.3370 overnight, setting the stage for a retest of 1.3520, the downtrend line from March 24.   A break above 1.3520 would negate the downtrend and suggest a short term bottom is in place at 1.3330.  For today,  USDCAD support is at 1.3370 and 1.3330.  Resistance is at 1.3440 and 1.3490.   Today’s Range 1.3390-1.3490

Chart: USDCAD 4 hour

Source:  Saxo Bank