May 28, 2020
USDCAD Open (6:00 am) 1.3768-72, Overnight Range: 1.3737-1.3788
- Weekly jobless claims results nearly on the money
- Month end US dollar selling pressures duelling with risking risk aversion sentiment
- China/US war of words elevating risk-off sentiment
- EURUSD hovering around 200 day moving average, Eurozone data mixed
- US dollar opens in NY, flat to slightly higher vs G-10 majors.
Percent change in currency value against US dollar- NY close to NY open (6:00 am ET)
FX Recap and outlook: FX markets ignored today’s US data dump. Weekly jobless claims rose 2.123 million (forecast 2.1 million) which was a close enough result to be ignored. Q1 GDP at -5.0% was a tad weaker than the -4.8% predicted and April Durable Goods Orders fell -17.2%. Canada’s current account deficit widened to $17.32 billion in Q1.
China’s approval of legislation to impose national security laws on Hong Kong, led to the US State Department certifying that HK is no longer autonomous., and bolstered negative risk sentiment. President Trump’s “blame China” re-election strategy isn’t helping. It jeopardizes a post-COVID-19 global economic rebound. At least oil markets think so. WTI dropped 11% since Tuesday when it hit $31.30/barrel overnight. Prices rebounded to $32.36/b with traders looking ahead to today’s US weekly crude inventories data.
Portfolio managers may be getting a jump on the monthly WM Reuters FX fixing rates. If the S&P 500 is around current levels by 11:00 am ED on Friday, portfolio managers may need to sell US dollars to rebalance their portfolios.
That selling pressure, and global economy reopening optimism, is offsetting rising risk aversion sentiment from rising US/China tensions.
EURUSD is consolidating this week’s gains which lifted prices from 1.0872, Monday to 1.1034 overnight.
Prices have retreated to just below the 1.1014, 200-day moving average, in early NY trading. EURUSD is supported by the proposed EU €825.0 billion relief fund and a small improvement in EZ consumer confidence in May. (actual -18.6 vs April -22) EURUSD needs to break above resistance in the 1.1040-70 zone or risk another sell-off to 1.0760.
GBPUSD is in a tug of war between demand on the back of an expected pos-COVID-19 lockdown recovery, and fears that EU/UK trade talks will not go beyond December 2020. Traders were also worried about the prospect of negative UK rates, despite BoE Chief Economist Andy Haldane suggesting otherwise.
USDJPY traded sideways in Asia in a narrow 107.70-107.89 range. Fears from US/China tensions offset hopes for a global economic recovery.
AUDUSD and NZDUD are consolidating gains made earlier this week. Month-end US dollar selling pressure and rising risk-off sentiment trapped both currency pairs in narrow ranges.
USDCAD tracked the Antipodean currency moves. Downside moves are encouraged by month-end selling, but souring risk sentiment is limiting losses. FX traders ignored the BC court decision that opened the door wider to Huawei CFO Meng Wanzhou’s extradition to the US. China threatened that Canada-China relations would suffer “continuous harm.” China’s Global Times claimed “experts said the “unjustified” ruling, which will mean the continued detention of Meng, has no real impact on Huawei, because the company will not succumb to the US because of any individual. But it will make Canada a pathetic clown and a scapegoat in the fight between China and the US.”
USDCAD Technicals: The technicals are unchanged from yesterday. They are bearish while trading below 1.4005, a level guarded by resistance at 1.3850. There is strong support in the 1.3710-40 zone, stemming from prior lows and the uptrend line from January 3. For today, USDCAD support is at 1.3730 and 1.3710. Resistance is at 1.3810, and 1.3850. Today’s Range 1.3730-1.3810
Chart: USDCAD 4 hour
Source: Saxo Bank