- Global growth, Russian aggression, rate hike concerns crush risk sentiment
- Global equities add to Friday losses
- USD soars on safe-haven demand
FX change at a glance: 24 hours
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2930-34, overnight range 1.2900-1.2948, previous close 1.2908
USDCAD rallied following Friday’s weaker than forecast employment report (actual 15,300 vs forecast 55,000). The move was exacerbated by a wave of negative risk sentiment which triggered a stampede into safe-haven US dollars.
The 10-year US Treasury climbed Friday and touched 3.201% in early NY today which weighed on S&P 500 Futures and boosted USDCAD.
WTI oil prices bounced off of $110.00 area resistance and dipped to $1107.91/b in early NY. Prices are supported by a pledge by G-7 nations to ban Russian energy. However, the Saudi’s cut prices for Asia customers in an effort to stimulate demand which has slowed due to China’s Covid restrictions. The WTI hourly chart shows a two-week uptrend while prices are above $105.00/b.
USDCAD direction continues to be determined by swings in global risk sentiment while domestic data and events are largely ignored.
Analysts blame some of the equity sell-off on “technical trading” in poor markets exaggerating the downside moves. The Canadian dollar was collateral damage.
The Bank of Canada will match or exceed Fed rate hikes, and oil prices are expected to stay firm. The USDCAD technicals show plenty of significant resistance in the 1.2960-1.3030 area which suggests these are attractive levels to sell USDCAD.
USDCAD technical outlook
The USDCAD technicals bullish while trading above 1.2900, supported by last week’s break above 1.2860. There are significant resistance levels in the 1.2950-1.2990 area representing previous tops and the price breakdown level from November 2020. The 38.2% Fibonacci retracement level of the March 2020-May 2021 range is in the 1.3020 area. A decisive break above 1.3020 would be very bullish for USDCAD. However, failure to break the tops side shifts the focus to support at 1.2500.
For today, USDCAD support is at 1.2905 and 1.2860. Resistance is in the 1.2960-90 area and 1.3030. Today’s Range 1.2870-1.2960
Chart: USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
FX markets are starting the week the way they ended the previous week, buying US dollars. Traders scrambled to buy safe-haven US dollars as speculation that US interest rates would rise far higher than previously expected, intensified.
The US 10-year Treasury yield climbed to 3.20% overnight, which is rather impressive as it was just three weeks ago that “experts” claimed bond yields fully priced in recovery and current cost pressures. Ooops! Analysts are now very worried by a global economic slowdown thanks to Russian aggression and exacerbated by China’s Covid-19 lockdowns.
Global growth concerns were front and center in Asia overnight after April exports were a paltry 3.9% compared to 14.7% last year. China imports from Russia jumped 56.6% as Xi Jinping flips the bird to the US and the west while he quantifies his support for “bestie” Putin.
The major equity indexes closed deep in the red. Hong Kong’s Hang Seng lost 3.81% while Japan’s Nikkei 225 dropped 2.52%. It is looking grim in Europe with the French CAC and the German Dax down 2.01% and 1.71% respectively. WTI oil prices are down 2.4% while gold lost 1.33%.
EURUSD traded in a 1.0496-1.0573 band, dipping in Asia, and climbing in Europe. The single currency is weighed down by negative risk sentiment stemming from equity market losses, the outlook for higher US rates, and the ongoing Russian invasion of Ukraine. Putin justified his actions to the Russian people as a defensive manoeuvre to prevent a NATO attack on Russian. EURUSD intraday technicals are negative below 1.0570.
GBPUSD continues to suffer fallout from the Bank of England monetary policy meeting when policymakers warned of inflation surging to 10% and analysts predicting a recession. GBPUSD technicals are bearish below 1.2450, targeting 1.2140.
USDJPY rallied from 130.41 to 131.34 on the back of higher US Treasury yields and Bank of Japan minutes reinforcing the dovish policy outlook. The gains were reversed in NY .
AUDUSD traded lower, falling from 0.7079 to 0.6986 due to fears of a Chinese economic growth slowdown and by broad US dollar strength. Prices recovered modestly to 0.7020 in NY trading
The US data calendar is empty.
Chart: US 10-year yield 24 hours
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
China Snapshot –
Today’s Bank of China Fix 6.6899 Previous 6.6332
Shanghai Shenzhen CSI 300 fell 0.80 % to 3,877.44
China exports tumbled as global demand weakened and Shanghai lockdown downs exacerbated supply chain disruptions
Chart: USDCNY 1 month
Source: Yahoo Finance