October 13, 2020
- Markets churn with flip-flopping risk sentiment
- No surprises from US CPI
- Resurgence of COVID saps German investor confidence
- Canadian dollar firms despite commodity currency bloc slump
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: Canadian’s return from a Covid-19 Thanksgiving holiday to find USDCAD outperforming its commodity currency bloc peers, and European equity indexes and US equity futures in negative territory. Disappointing coronavirus vaccine testing results offset positive sentiment from robust China trade data.
Monday was Columbus Day in America, but only a partial holiday. Government employees got the day off, but Wall Street was open. Prices climbed on expectations of a good earnings season.
Today’s US inflation data was as expected. Headline and Core September CPI rose 0.2% . FX markets did not react to the news.
EURUSD traded in a 1.1779-1.1831 since it closed on Friday and has a modestly negative bias. Dovish comments from ECB officials raised expectations for further easing at the Oct 29 meeting. Outgoing ECB board member Yves Mersch spoke of the need to make debt issuance a permanent tool in ECB arsenal. At the same time, Vice President Luis de Guindos said the Eurozone recovery was losing momentum. Eurozone and German ZEW Economic Sentiment Surveys slumped. German October Economic Sentiment was 56.1 compared to 77. 4 in September, while EZ sentiment dropped to 52.3 from 73.9.
GBPUSD is trading like the EU/UK have agreed on a Brexit deal. GBPUSD traded in a 1.3016-1.3080 range since closing Friday at 1.3046. Prime Minister Boris Johnson issued a rash of new CVODI-19 restrictions, but they didn’t bother traders. The Prime Minister’s deadline for a Brexit deal is October 15, or else, the UK walks away from talks. That should make the next few days interesting. The UK employment report was ignored.
USDJPY is back at the top of its overnight, 105.29-105.50 range. Prices are supported by hopes for a Democrat election win and a large stimulus package to follow.
AUDUSD was the worst-performing currency. Prices dropped from 0.7242 at Friday’s close to 0.7167. The bulk of the move happens overnight when China reportedly halted coal imports. China and Australian politicians have been feuding ever since Australia called for an inquiry into the COVID-19 pandemic. Halting coal shipments is just another salvo in the fight.
USDCAD consolidated Friday’s losses, after Canada’s better than expected employment report. The 328,000 new jobs far exceed forecast for a gain of 157,000. In normal times this result would have driven USDCAD lower by about 0.0300 points.
However, Canada is still 720,000 jobs shy of pre-COVID levels, which kind of takes the shine off the data. The resumption of economy-killing lockdown measures in parts of Ontario, and Quebec is also acting as a drag to further USDCASD losses.
There are not any Canadian economic reports today. The US releases CPI which is expected to rise 0.2% m/m.
USDCAD Technicals: The intraday technicals are bearish below 1.3140, looking for a break below 1.3090 to extend losses to 1.2995. The 1.2990 area is also the 76.4% Fibonacci retracement level of the September range, which suggests USDCAD may bounce. For today, USDCAD support is at 1.3090 and 1.3060. Resistance is at 1.3140 and 1.3190. Today’s Range 1.3090-1.3170
Chart: USDCAD 4 hour with Fibonacci retracement levels shown
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank