Source: BBC

March 9, 2022

  • European/US equity indexes are rallying
  • EURUSD extends rally on stimulus and short covering
  • US dollar opens with losses compared to Tuesday

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2818-22, overnight range-1.2808-1.2892 close 1.2889

USDCAD rallied yesterday due to a wave of negative risk sentiment against a backdrop of rising crude and gold prices.

Traders ignored news Canada’s trade balance swung back to a surplus, a clear benefit of higher oil prices.

WTI oil fell sharply after flirting with $130.00/barrel yesterday. Prices dropped from $126.78 in Asia to $117.24 in early NY trading mainly due to profit-taking and reports another Iran nuclear deal is nearly complete. Yesterday, the American Petroleum Institute reported crude inventories rose 2.81 million barrels in the week ending March 4.

The US ban of Russian oil is considered symbolic as it is only about 672,000/b per day of which only 199,000 barrels are crude.  The rest are used for further processing than exported.   It may be symbolic, but consumers will be paying higher prices for the symbolism.

President Biden tried calling Saudi and UAE leaders to discuss the spike in oil prices, but just got a “busy” signal.

USDCAD direction will continue to track S&P 500 moves.

USDCAD technical outlook

The intraday USDCAD technicals suggest the drop from 1.2899 yesterday is merely a correction while prices are above the 1.2780-90 support zone.  A move below 1.2780 targets 1.2705 and then 1.2660.  A decisive break above the 1.2900 suggest a test of 1.3000 is likely.  A decisive break above the 1.3000-1.3040 area, targets 1.3500.

For today, USDCAD support is at 1.2780 and 1.2740.  Resistance is at 1.2860 and 1.2900. Today’s Range 1.2790-1.2890

Chart USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

It seems like traders are suffering headline fatigue.  The Russia/Ukraine war, sanctions, inflation, oil, interest rate outlooks, and other headlines have traders taking a COVID moment.  They act like the issues have disappeared just because they are tired of hearing about them when that is certainly not the case.

The major European equity indexes are soaring, led by a 4.87% gain in the German Dax and a 4.56% rise in the French CAC index.  Gold prices dropped $56.00/ounce since yesterday’s peak, and oil prices are down nearly $10.00/barrel.  Wall Street is poised to open with solid gains as S&P 500 futures have risen 1.54% (6:45 am).  The US dollar retreated despite the 10-year Treasury yield climbing to 1.906% from 1.837% overnight.

Nevertheless, the current euphoria may be short-lived.  Fitch rating agency warns that Russia is on the brink of defaulting on its debt.  Its next payment is March 16, but it has a 30 day grace period.

EURUSD rallied from 1.0891 to 1.1004 due to a mix of profit-taking and the news of the EU stimulus package.  Traders anticipate a volatile ECB meeting on Thursday as the Russian/Ukraine conflict makes mincemeat out of economic forecasts and kicks the risk of a rate hike further down the road.  The EU slapped more sanctions on Russia but avoided targeting energy imports.

However, that doesn’t preclude Russia from countering EU sanctions with an energy export ban.  The EURUSD downtrend from February 23 is intact while prices are below 1.1050.

GBPUSD is in the middle of its overnight 1.3090 to 1.3180 range as EURUGBP demand acts as a drag on gains.

USDJPY rose from 115.67 to 115.93, underpinned by the selling of safe-haven JPY trades and bysharply higher US Treasury yields.

AUDUSD rallied from 0.7266 to 0.7336 thanks to the improved risk tone in Europe. Comments from RBA Governor Philip Lowe about the need for patience, were dismissed.

The Canadian economic calendar is empty and the US data is second-tier.

Chart of the Day: Gold (XAUUSD)

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 6.3178 previous 6.3185

Shanghai Shenzhen CSI 300 fell 0.92% to 4,226.35

February CPI 0.6% vs forecast 0.3% and January 0.4%

February PPI 8.8% y/y vs forecast 8.7% and January 9.1% y/y

US Commerce Secretary Gina Raimondo warns that Chinese companies defying US sanctions against exporting to Russia may be see US bans of critical components.

A Chinese foreign ministry spokesman said US policies toward Ukraine and Russia should not harm China’s” rights and interests.”

Chart: China 1 month

Source: Saxo Bank